COMPANIES 
Martin Sullivan, the newly installed chief executive of American International Group, was dealt a setback on his first day in the job when a credit agency stripped the insurer of its AAA rating.
Fitch downgraded AIG's debt to AA+ on concerns over the widening investigations into accounting practices that forced the retirement of Maurice “Hank” Greenberg.
Moody's, AM Best and Standard & Poor's all placed AIG's credit rating on review, a signal of possible downgrade. Such moves might raise AIG's borrowing costs.
The agencies' actions underlined the challenge facing Mr Sullivan as he takes the helm of AIG's sprawling empire.
“Sullivan is an impressive AIG executive who has great knowledge of the property and casualty side of AIG,” said Paul Newsome, an analyst at AG Edwards. “However, I haven't seen him express great knowledge about AIG's other businesses.”
Julie Burke, managing director at Fitch Ratings, agreed the task would be difficult. “Job one is to get beyond the various investigations and a lot of the noise surrounding that. But while all of this is going on, the factory still has to run,” she said.
Investors fretted about the possibility that AIG would restate earnings after the insurer said late on Monday that its chief financial officer Howard Smith took leave at the request of the board and it would delay the filing of its annual report with the Securities and Exchange Commission. AIG's stock ended the day down 3.1 per cent in New York.
On a conference call with analysts, Mr Sullivan and Steve Bensinger, AIG's new chief financial officer, played down the threat of further ratings downgrades and a restatement. “Our internal previews are under way and we can say with a reasonable degree of assurance that we said in the press release that we don't believe that I will have an effect on our financial condition,” Mr Bensinger said.
Mr Sullivan will continue to have a close working relationship with Mr Greenberg, who remains non-executive chairman. On a conference call on Tuesday, Mr Sullivan told employees to stay focused and Mr Greenberg joked “he would hunt” them down if they did not comply with the new chief executive's demands.
Mr Greenberg's long reign at AIG came to an end on Monday when the board intervened after regulators found evidence of his involvement in a transaction they believed was designed to inflate the insurer's figures.
Last month, AIG received subpoenas from the Securities and Exchange Commission and Eliot Spitzer, the New York attorney-general, related to a complex reinsurance contract agreed in 2000 with General Reinsurance, a subsidiary of Warren Buffett's Berkshire Hathaway.
The e-mails and depositions they received provided evidence to suggest the contract was used to inflate AIG's reserves by $500m, according to one person close to the investigation.
