AIG Ratings Take A Beating After Disclosure

By Michael Ha

NU Online News Service, March 31, 4:20 p.m. EST?The admission by American International Group that it has discovered improper finite reinsurance accounting with General Re as well as other problems in its bookkeeping methods has triggered a wave of ratings downgrades.[@@]

Moody's Investors Service today lowered its long-term senior debt ratings on AIG to "Aa1" from "Aaa," and has placed the ratings on review for possible further downgrade.

The agency's action followed a downgrade by Standard & Poor's Ratings Services yesterday, which cut its long-term counterparty credit and senior debt ratings, as well as financial strength ratings on most of AIG's subsidiaries, from the prized "AAA" to "AA-plus."

Fitch Ratings placed its "AA-plus" long-term issuer rating and unsecured senior debt obligations on "Rating Watch Negative."

AIG announced yesterday that possible adjustments from its accounting irregularities could add up to a book-value loss of $1.7 billion. The carrier also postponed its 2004 10-K filing with the Securities and Exchange Commission for a second time?until the end of April?as the company and its new top management continue to look into accounting problems.

Moody's said AIG's findings are suggestive of a "culture of financial aggressiveness and of control inadequacies," lacking the disciplines of internal control, risk management, corporate governance, and a commitment to financial conservatism.

The agency also mentioned continuing uncertainty about the scope of ongoing regulatory investigations, internal reviews, and financial restatements and/or adjustments.

"The number and scope of inappropriate financial transactions?some characteristic of aggressive financial management?have diminished our assessment of management and its internal controls, corporate governance, and aggressive culture," said S&P credit analyst Grace Osborne.

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AIG Ratings Take A Beating After Disclosure

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