Investors and rating agencies reacted negatively to disclosures by American International Group about a derivative portfolio, which included the revelation that its auditors gave the thumbs down to the company's internal controls for financial reporting.
AIG's potential losses from its investments in certain derivatives could range from not material to a total write-off of earnings for fourth-quarter 2007, a Citigroup analyst said in a note to investors last week.
In addition, rating agencies, reacting to the failing grade delivered to AIG by its auditors in connection with the valuation of a credit default swap portfolio of AIG Financial Products Corp., said they would put a negative outlook on some of the insurer's credit ratings.
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