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Standard & Poor’s Ratings Services has lowered its long-term counterparty credit and senior debt ratings on American International Group Inc. (ÌìÃÀÍøÕ¾´«Ã½´«Ã½) to AA from AA-Plus. Standard & Poor’s also removed the New York-based insurance company from its credit watch list for these categories.

The decision was in response to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s announcement earlier this week that it was restating earnings for five years and raising reserves.

On Tuesday, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ – which is under investigation by state and federal regulators over accounting issues – filed its long-awaited 2004 annual report with the Securities and Exchange Commission, restating financial results for the past five years.

The same day, Moody’s Investors Service confirmed its long-term senior debt ratings on ÌìÃÀÍøÕ¾´«Ã½´«Ã½ at Aa2 based on the report and revised its outlook to “stable.” Fitch Ratings termed ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s filing “a modest positive development” but kept the company’s debt on negative ratings watch because of “significant short-term and longer term uncertainties.”

Standard & Poor’s said it took the action because of “the size and scope of the accounting adjustments in its recently released 10-K filing.” The agency also expressed concern about the possibility that ÌìÃÀÍøÕ¾´«Ã½´«Ã½, after a company-initiated study, could raise its reserves. Standard & Poor’s estimated the increase could be up to $2 billion. An increase in reserves typically reduces profits.

It also noted: “Several investigations by states’ attorneys general, the SEC, and insurance regulators are underway, and the company is the subject of shareholder suits. The ratings incorporate Standard & Poor’s assumptions about potential legal or regulatory settlements, disgorgement of profits, and litigation costs that slightly exceed $1 billion.”

Standard & Poor’s said it would continue to monitor ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s performance.

Standard & Poor’s also lowered its rating on ÌìÃÀÍøÕ¾´«Ã½´«Ã½ preferred stock to A-Plus from AA-Minus and it lowered its financial strength ratings on the three insurance subsidiaries that are ultimately guaranteed by ÌìÃÀÍøÕ¾´«Ã½´«Ã½ – ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Life Insurance Co. of Canada, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Life Insurance Co. of PR and American International Assurance Co. Ltd. to AA.

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