AIG survival prospects dim on credit downgrade

Three major credit agencies lowered their ratings for American International Group, dashing hopes to save one of the one world's biggest insurance companies amid a burgeoning financial crisis.

The downgrades Monday looked likely to sound the death knell for AIG, making it harder for the US insurance giant to raise the cash needed to deal with its own liquidity crisis.

Standard & Poor's Ratings Services lowered its long-term counterparty rating to 'A-' from 'AA-' and its short-term counterparty credit rating on AIG to 'A-2' from 'A-1+' according to a statement.

"The main reason for the rating actions is the combination of reduced flexibility in meeting additional collateral needs and concerns over increasing residential mortgage-related losses," said Standard & Poor's credit analyst Rodney Clark.

Moody's downgraded AIG to 'A2' from 'AA3,' and Fitch lowered its rating to 'A' from 'AA.'

The struggling insurance giant had been thrown a lifeline earlier Monday by New York authorities, who said the company could borrow some 20 billion dollars from its subsidiaries.

However, the move failed to impress investors as AIG shares plunged some 61 percent on the stock market, losing some 20 billion dollars in market value. In just a year, the group has lost 93 percent of its value and is only worth some 12.8 billion dollars.

AIG has primarily been shaken by fears that it could be the next domino to fall in the worst banking crisis to shake Wall Street since the Great Depression.

Saddled with toxic mortgage-backed derivatives, AIG was attempting to stave off the same type of liquidity crisis that has felled Bear Stearns and Lehman Brothers, which filed for bankruptcy protection on Monday, sending world markets into free fall.