Moody's: AIG outlook negative

Moody's Investors Service said it changed the outlook for American International Group, Inc. (senior unsecured debt rated Aa2) to negative from stable, based on the company's sizable exposure to the U.S. subprime mortgage market, where credit quality and liquidity remain under pressure.

The potential for loss within this mortgage portfolio is significant because of the company's recent trend toward a more aggressive capital structure, with operating leverage and financial leverage rising over the past few years, Moody's said.

Ratings reflect the company's leading market positions in all major business segments, its broad business and geographic scope, its strong earnings and cash flows, and its excellent financial flexibility, the agency said.

These strengths are tempered by the intrinsic volatility in certain general insurance and financial services business units, by the significant volume of spread-based investment business in the asset management segment and by the company's sizable exposure to the subprime mortgage market, Moody's said.

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