Standard & Poor's Ratings Services has cut AIG's long-term counterparty credit and senior-debt ratings to "double-A" from "double-A-plus," citing AIG's accounting adjustments revealed in its 10-K annual report filing this week.

S&P has now removed AIG ratings from its "CreditWatch negative" status. These AIG ratings had been placed on CreditWatch on March 15, following AIG's announcement of management changes and a delay in the 2004 10-K filing.

"The downgrade on the holding company reflects both the size and scope of the accounting adjustments in its recently released 10-K filing," S&P credit analyst Grace Osborne said. And although AIG's overall earnings are considered strong, she added, its property-casualty earnings, as now restated, show greater volatility and less robust profitability than was previously reported.

S&P also said it is estimating that incremental property-casualty reserves additions could be as much as $1 billion-$2 billion. AIG has announced this week that it took $850 charge for asbestos-and-environmental reserves and said it will start a comprehensive review of domestic and foreign p-c reserves.

Another concern S&P expressed is the investigations by states' attorneys general, the Securities and Exchange Commission, and insurance regulators, as well as shareholder suits. S&P said it is assuming that it will cost AIG a little more than $1 billion to deal with potential legal or regulatory settlements, disgorgement of profits, and litigation costs.

Earlier this week, another major ratings agency, Moody's Investors Service, confirmed AIG's long-term senior debt ratings at "Aa2" and revised its outlook to "stable." Fitch Ratings is keeping AIG's debt on "negative ratings watch" because of "significant short-term and longer term uncertainties."

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
  • Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.