S&P says may cut ratings on some AIG units

NEW YORK, Nov 5 (Reuters) - Standard & Poor's said it may cut its credit ratings on some American International Group (AIG.N) property and casualty insurance units, because the company's weakened position may result in its losing business.

The entire property and casualty insurance industry is facing difficult times now, in part because investment portfolio returns are weakening, the ratings agency said. Pricing is also under pressure, S&P said, adding that over the medium term ratings in the industry may decline.

But AIG's business could face particular difficulty "given its somewhat weakened position," S&P said. The ratings agency had previously said it may upgrade or downgrade AIG's property and casualty units.

Ratings downgrades often boost a company's borrowing costs, and may make customers less reluctant to do business with a company.

In September, AIG faced massive margin calls on its credit derivatives positions, and staved off bankruptcy only by receiving an initial emergency loan of $85 billion from the New York Federal Reserve. AIG later announced its restructuring plan, which included selling off life insurance units but keeping its main property and casualty businesses.

Although there is not yet clear evidence that AIG's franchise has been damaged long term, competitors are reportedly actively pursuing AIG's customer and key underwriting personnel, which could pressure its performance, S&P said.

Standard & Poor's said it expects prospective buyers of AIG's life insurance businesses would be rated at least 'AA-', which it said would benefit the ratings of those AIG units. (Reporting by Phil Wahba and Dan Wilchins; Editing by Tim Dobbyn, Richard Chang)