NEW YORK (Reuters) - AM Best cut its financial strength ratings on American International Group Inc , the world's largest insurer, citing the company's hiring of a new chief executive, and subsequent plans for a sweeping review.

The ratings agency said AIG's sudden decision to install a new chief, and the organisation-wide review the company has since unveiled, were not in keeping with its "highest rating categories".

AIG named chairman Robert Willumstad to the additional post of chief executive Sunday, replacing Martin Sullivan after three years on the job. AIG reported record losses in the fourth, and first quarters, stemming from more than $20 billion in write-downs to the value of assets linked to sub-prime mortgages.

Willumstad on Monday promised to undertake a "bottom up" review over the next three months, and could shed assets, as part of that review, he said. The changes at AIG "highlight a deeper level of systemic challenges," Oldwick, New Jersey-based AM Best, said in a statement, citing AIG as being at a "critical juncture."

AM Best's ratings are closely watched by insurance buyers. The ratings firm said it did expect to see improvement under AIG's new leadership, but that it was likely to take time.

AIG shares closed down five percent, or $1.73 to $32.28, in late trade on the New York Stock Exchange.