S&P cuts AIG ratings

NEW YORK—Standard & Poor's Corp. late Monday downgraded its long-term counterparty rating on American International Group Inc. to A- from AA-.

In addition, New York-based S&P lowered its short-term counterparty credit rating on AIG to A-2 from A-1+ and dropped its counterparty credit and financial strength ratings on most of AIG's insurance operating subsidiaries to A+ from AA+.

S&P noted that the ratings remain under review with negative implications.

The move followed downgrades by A.M. Best Co. Inc. and Fitch Ratings Monday.

In a statement, S&P credit analyst Rodney A. Clark said that the main reason for the ratings actions was "the combination of reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses."

S&P noted that its rating action followed an announcement by New York officials that some of AIG's subsidiaries would be allowed to "provide the parent company with $20 billion of liquid investments."

Mr. Clark said in the statement, "The ratings remain on CreditWatch pending the completion of the asset transfer to the parent, the implementation of further liquidity options, and the successful sale of at least a portion of" AIG's business assets.

"If these steps are successful and if the deterioration in mortgage-related assets appears to be manageable with the newly raised capital, then we could remove the ratings from CreditWatch and affirm them. However, if these steps are not successful or if mortgage-related losses continue to worsen, then we could lower the ratings into the 'BBB' category."