American International Group climbed nearly 2 percent on Friday after Morgan Stanley raised its rating for the company.

Morgan Stanley analyst Nigel Dally boosted his rating for AIG from overweight to equal-weight saying the firm has enough capital, that its losses will reverse and that investment returns are better than what the stock's price reflects.

Shares of AIG rose 83 cents, or $2.35 percent to $36.17 in late Friday trading.

The current stock price could only be justified if the company reported significant additional writedowns, he wrote in a note to clients.

The financial services crisis would need to significantly deepen before it would be looking to raise more capital,'' Dally said. Pressure on the stock price year-to-date has now been considerably overdone.

AIG has raised more than $20 billion in capital after reporting large losses in investments linked to the struggling housing markets.