updated 3/31/2005 7:41:06 AM ET 2005-03-31T12:41:06

Standard & Poor’s cut American International Group’s top debt ratings on Wednesday and said it may cut them further, citing accounting errors that the credit ratings agency said raise questions about management at the insurer.

The cut, which may slightly increase the company’s borrowing costs, is also a blow to the prestige of what had been one of only a handful of U.S. companies to bear a top “AAA” rating from S&P.

Top-rated companies are a dying breed and AIG’s downgrade left only about half a dozen companies with a “AAA” rating with S&P.

Fitch Ratings followed suit, warning it may cut AIG’s long-term issuer and unsecured senior debt ratings, now at “AA-plus.”

AIG on Wednesday acknowledged that it had made accounting errors that could stretch back years. The number and scope of inappropriate financial transactions raise questions about management’s aggressive character and the company’s internal controls, S&P said.

AIG also delayed the filing of its annual report a second time. The company said it now expects to file it with regulators by April 30.

During a conference call with analysts, S&P said it will keep AIG’s rating on review for a possible downgrade until it sees the annual report.

“If we’ve seen the worst of it then we anticipate affirming their rating,” Steve Dreyer, a managing director at S&P, said in a subsequent interview with Reuters, referring to the current “AA-plus” rating.

S&P cut AIG’s senior debt rating and long-term counterparty credit rating to “AA-plus,” the second-highest rating, from “AAA.” Counterparty credit ratings pertain to transactions like derivatives trades. A host of other ratings, including those at subsidiaries, were also cut.

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