NU Online News Service, May 5, 5:00 p.m. EDT–Ratings firm A.M. Best Co. has downgraded the majority of its financial strength ratings on American International Group Inc.'s insurance units.
The move follows New York-based AIG's disclosure earlier this week of yet another delay in its annual 10-K filing and more book-value losses stemming from past accounting abuses.
The Oldwick, N.J.-based Best said its ratings actions–which dropped most AIG insurance units from "A-double-plus" to "A-plus"–come after the insurer's recent disclosure of more accounting problems.
Further, Best's Issuer Credit Ratings, assigned to the operating companies, have been downgraded to "double-a-minus" from "double-a-plus." Ratings remain under review with negative implications.
Best commented that the extent of the internal control issues disclosed by AIG "exceeded A.M. Best expectations."
The ratings firm said the extent and number of accounting restatements, as well as the disregard of accounting regulations and financial reporting to auditors, regulators and others, made even more apparent in the last AIG disclosures, are the "direct causes of the downgrade."
The downgraded ratings will remain under review with negative implications until AIG files its annual 10-K, now scheduled for the end of May. Best said it will then fully review various managerial, reputational, operational and financial issues.
AIG, in its latest announcement this week, said its internal review has uncovered accounting irregularities that will cost a book-value loss of $2.7 billion, an increase of $1 billion from previous estimates. But most of these losses could be mitigated by AIG's accounting of hedging accounting, which could boost book values by as much as $2.4 billion, the insurer said.
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