Moody's cuts AIG senior debt to Aa2

Moody's Investors Service said it lowered its long-term senior debt ratings on American International Group, Inc. to Aa2 from Aa1. These ratings remain on review for possible further downgrade.

The debt and insurance financial strength ratings of several supported entities including the group's supported life insurance and mortgage insurance subsidiaries and of members of AIG's Domestic Brokerage Group have also been lowered to Aa2 from Aa1, and remain on review for further possible downgrade.

The short-term prime-1 debt ratings of AIG Funding, Inc. and AIG Liquidity Corp. are confirmed with a stable outlook, and the short-term (prime-1) and long-term (senior unsecured at A1) ratings of the company's principal commercial and consumer finance subsidiaries (International Lease Finance Corp. and American General Finance Corp.) are not affected and have been affirmed with a stable.

Moody's said these rating actions follow the company's announcement that the filing of its 2004 Form 10-K continues to be delayed and that the extensive financial review, which is not yet complete, has yielded further evidence of financial misstatements.

Since AIG's last announcement on March 30, Moody's said the ongoing investigations and internal reviews indicate that the number of transactions that appear to have been undertaken primarily to enhance reported financial results and the range of categories and operating units involved in potential financial misstatements have increased.

The company has also increased its estimate of the after-tax financial impact of these items, up to a $2.7 billion reduction of shareholders' equity.

While the estimated aggregate affect of these misstatements on AIG's equity remains small relative to the company's total resources, Moody's said that the breadth of these problems confirm that aggressive accounting practices were greater and more widespread than anticipated.

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