Fitch Expects to Rate AIG's New Sr. Unsecured Notes 'BBB'

Wed Sep 25, 2013 6:00pm EDT

Related Topics

(The following statement was released by the rating agency) CHICAGO, September 25 (Fitch) Fitch Ratings expects to assign a rating of 'BBB' to American International Group, Inc.'s (AIG) $1 billion issuance of 4.125% senior notes due 2024. The transaction is expected to close on Oct. 2, 2013. KEY RATING DRIVERS The new issue rating is equivalent to the ratings on AIG's existing senior debt. Proceeds from the issue will be used for general corporate purposes. The new issuance will increase AIG's pro forma financial leverage ratio (excluding financial related debt) modestly to approximately 20% from 19% at June 30, 2013. On Aug. 8, 2013, Fitch affirmed all of AIG's ratings, including AIG's Issuer Default Rating (IDR) of 'BBB+' with a Stable Outlook. RATING SENSITIVITIES Key triggers that could lead to future rating upgrades include: --Demonstration of higher and more consistent earnings within Property/Casualty or Life & Retirement operating segments that translate into average earnings-based interest coverage above 7.0x, corresponding with operating earnings of approximately $11 billion; --Further improvement in AIG's capital structure and leverage metrics that reduce the company's total financing and commitments (TFC)ratio to below 0.7x; -- A shift toward consistent underwriting profits would promote positive movement in the property/casualty subsidiary financial strength ratings. Key triggers that could lead to a future rating downgrade include: --Increases in financial leverage as measured by financial debt-to-total capital to a sustained level above 30%, or a material increase in the TFC ratio from current levels; --Large underwriting losses and/or heightened reserve volatility of the company's non-life insurance subsidiaries that Fitch views as inconsistent with that of comparably-rated peers and industry trends; --Deterioration in the company's domestic life subsidiaries' profitability trends; --Material declines in risk-based capital(RBC) ratios at either the domestic life insurance or the non-life insurance subsidiaries, and/or failure to achieve the above noted capital structure improvements. Fitch has assigned the following rating: --USD1 billion of 4.125% senior unsecured notes due Feb. 15, 2024 at 'BBB'. Fitch currently rates the AIG entities as follows: AGC Life Insurance Company American General Life Insurance Company The Variable Annuity Life Insurance Company United States Life Insurance Company in the City of New York --Insurer Financial Strength (IFS) rating 'A+'; Stable Outlook. AIU Insurance Company American Home Assurance Company Chartis Casualty Company AIG Europe Limited AIG MEA Insurance Company Limited American International Overseas Limited Chartis Property Casualty Company Chartis Specialty Insurance Company Commerce & Industry Insurance Company Granite State Insurance Company Illinois National Insurance Company Insurance Company of the State of Pennsylvania Lexington Insurance Company National Union Fire Insurance Company of Pittsburgh, PA New Hampshire Insurance Company --Insurer Financial Strength (IFS) rating 'A'; Stable Outlook. American International Group, Inc. --Long-term IDR at 'BBB+' Outlook Stable. AIG International, Inc. --Long-term IDR 'BBB+', Outlook Stable; --USD175 million of 5.60% senior unsecured notes due July 31, 2097 'BBB'. American International Group, Inc. --Various senior unsecured note issues 'BBB'; --USD1.5 billion of 4.875% senior unsecured notes due June 2022 'BBB'. --USD1.2 billion of 4.250% senior unsecured notes due Sept. 15, 2014 'BBB'; --USD800 million of 4.875% senior unsecured notes due Sept. 15, 2016 'BBB'; --EUR420.975 million of 6.797% senior unsecured notes due Nov. 15, 2017 'BBB'; --GBP323.465 million of 6.765% senior unsecured notes due Nov. 15, 2017 'BBB'; --GBP338.757 million of 6.765% senior unsecured notes due Nov. 15, 2017 'BBB'; --USD256.161 million of 6.820% senior unsecured notes due Nov. 15, 2037 'BBB'; --USD1 billion of 3.375% senior unsecured notes due Aug. 15, 2020 'BBB'; --USD250 million of 2.375% subordinated notes due Aug. 24, 2015 'BBB-'; --EUR750 million of 8.00% series A-7 junior subordinated debentures due May 22, 2038 'BB+'; --USD4 billion of 8.175% series A-6 junior subordinated debentures due May 15, 2058 'BB+'; --GBP309.850 million of 5.75% series A-2 junior subordinated debentures due March 15, 2067 'BB+'; --Eur409.050 million of 4.875% series A-3 junior subordinated debentures due March 15, 2067 'BB+'; --GBP900 million of 8.625% series A-8 junior subordinated debentures due May 22, 2068 'BB+'; --USD687.581 million of 6.25% series A-1 junior subordinated debentures due March 15, 2087 'BB+'. AIG Life Holdings, Inc. --Long-term IDR 'BBB+'; Outlook Stable. --USD150 million of 7.50% senior unsecured notes due July 15, 2025 'BBB'; --USD150 million of 6.625% senior unsecured notes due Feb. 15, 2029 'BBB'; --USD300 million of 8.50% junior subordinated debentures due July 1, 2030 'BB+'; --USD500 million of 7.57% junior subordinated debentures due Dec. 1, 2045 'BB+'. --USD500 million of 8.125% junior subordinated debentures due March 15, 2046 'BB+'. ASIF II Program ASIF III Program ASIF Global Financing --Program ratings 'A'. Contact: Primary Analyst James B. Auden, CFA Managing Director +1-312-368-3146 Fitch Ratings, Inc. 70 W. Madison Street Chicago IL 60602 Secondary Analyst Tana M. Higman Director +1-312-368-3122 Committee Chairperson Keith M. Buckley Managing Director +1-312-368-3211 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Insurance Rating Methodology', Aug. 19, 2013. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.