Standard & Poor’s Ratings Services has cut its rating on the senior debt of American International Group Inc.[@@]

S&P, New York, is reacting to the release of the company’s long-delayed Form 10-K annual report by lowering its rating on AIG’s debt to AA with a negative outlook, from AA plus.

S&P also is lowering the ratings of 3 subsidiaries – AIG Life Insurance Company of Canada, AIG Life Insurance Company of Puerto Rico and American International Assurance Company Ltd. – to AA, from AA plus.

S&P announced that it might cut the ratings March 15, after AIG said it was postponing the release of its 10-K.

“The downgrade on the holding company reflects both the size and scope of the accounting adjustments in its recently released 10-K filing,” Grace Osborne, an S&P credit analyst, says in a comment on the rating change.

In addition to changes already announced, reviews of property-casualty reserves could force AIG to spend as much as $2 billion more to beef up reserves, and S&P is assuming that litigation costs and other regulatory costs will cost about $1 billion, S&P says.

AIG noted in its 10-K that it might have to provide $2.3 in additional collateral for municipal guaranteed investment contracts and financial derivatives transactions if S&P lowered its rating on AIG to AA minus. But experts are saying S&P’s move to cut AIG’s rating to AA probably will not have a big effect on collateral requirements.