SEC To Probe AIG's Portfolio After Posting Huge Writedowns

New York, NY (AHN) - Shares of American International Group Inc., the world's biggest insurer by assets, dropped in New York trading after a report said federal regulators are going to scrutinize the company.

The Wall Street Journal reported on Friday that the U.S. Securities and Exchange Commission is investigating the beleaguered insurance giant whether it has overstated the value of contracts tied to subprime mortgages. The Justice Department in Washington and the department's U.S. attorney's office in Brooklyn, New York, have asked the SEC to share any information gathered during its AIG investigation.

The company's stock has been battered due to the losses related to the subprime mortgage market.

The insurer reported as much as $7.81 billion losses in its first-quarter, while posted a total of an $11.5 billion writedown to its swap portfolio in 2007. In 2006, the company settled an accounting fraud case for $1.6 billion.

As of April 30, the firm has reported $9.7 billion in collateral related to its swaps, which is more than $5.3 billion posted around two months ago. In the month of May, Standard & Poor's, Fitch Ratings and Moody's Investors Service downgraded AIG's debt after it reported the huge writedowns to its swap portfolio.

But the company may raise up to $10 billion in capital to avoid any further credit ratings cut, after it the market analysts have speculated that the insurer may have to raise as much as $20.3 billion.

Shares of AIG declined $2.29, or 6.3 percent, to $34.12 at 12:32 p.m. in New York Stock Exchange composite trading on Friday.