Bermuda reinsurer Imagine Group Holdings yesterday said it had two months ago restated certain income statement items related to reinsurance contracts with American International Group because not enough risk was transferred in the contracts.

A story in Thursday?s business section said Imagine intended to make the restatement but did not state it had already been made.

Imagine made its income statement adjustments, which have no impact on net income or the group?s balance sheet, after AIG admitted in May to effectively controlling a Barbados reinsurer, Union Excess, that Imagine used to reinsure the risk it assumed in selling AIG affiliates two reinsurance contracts in 2003.

Imagine?s restatement was made to re-account for the reinsurance contracts under deposit accounting rules because risk transfer was not sufficient to qualify the contracts for the more favourable reinsurance accounting.

On Thursday The Royal Gazette reported the policies Imagine sold to AIG were worth $609 million in gross premiums under the original accounting but were adjusted by $120.8 million to $489 million in the restatement, according to information that appeared in Imagine?s financial note on the restatement.

Chief financial officer Mike Daly, who is also serving as interim CEO with chief underwriting officer Bob Forness after founder and ex-CEO Brad Huntington recently stepped down, said yesterday the numbers in the note were actually reflective of the total gross premiums Imagine wrote in 2003.

AIG?s business with Imagine in 2003 amounted to less than 20 percent of that $609 million in gross written premiums, he said.

Mr. Daly said yesterday that Imagine received its second subpoena related to a broad U.S. investigation of the insurance sector, this one from the U.S. Department of Justice, in June.

Imagine has about 130 staff in several offices around the world, including a presence in the U.S.

Imagine previously disclosed it had received a subpoena last December from the U.S. Securities and Exchange Commission in connection with an investigation that New York Attorney General Eliot Spitzer is also part of.

?Both the subpoenas were general in nature, only requesting certain information related to non-traditional products,? Mr. Daly said.

Imagine is 80 percent owned by Brascan Corp., a Toronto-based asset management firm.

Brascan originally provided 90 percent funding when Imagine was founded in late 2000 as a finite risk reinsurer, but in 2004 Imagine added two new investors that contributed $100 million in capital. The capital injection reduced Brascan?s Imagine stake down to 80 percent.