S&P: Ratings on American International Group Lowered and Kept on CreditWatch
Negative
NEW YORK, Sept. 15 /PRNewswire/ -- Standard & Poor's Ratings Services said
today that it lowered its long-term counterparty rating on American
International Group Inc. (NYSE: AIG) to 'A-' from 'AA-' and its short-term
counterparty credit rating on AIG to 'A-2' from 'A-1+'.
Standard & Poor's also said that it lowered its counterparty credit and
financial strength ratings on most of AIG's insurance operating subsidiaries
to 'A+' from 'AA+'.
All of these ratings remain on CreditWatch with negative implications,
where they were placed on Sept. 12, 2008.
"The main reason for the rating actions is the combination of reduced
flexibility in meeting additional collateral needs and concerns over
increasing residential mortgage-related losses," explained Standard & Poor's
credit analyst Rodney A. Clark. Mark-to-market losses from mortgage-related
investments and swap exposures have placed significant pressure on AIG's
ability to access capital and liquidity. This is happening concurrently with
significant dislocation across the financial markets. Despite these factors,
the ratings also reflect the group's strong and diversified global competitive
position in life and general insurance as well as its historically strong
operating results.
This action follows an announcement by the New York Department of
Insurance that it would permit some of AIG's regulated insurance subsidiaries
to provide the parent with $20 billion of liquid investments. This will
permit the parent company to satisfy immediate liquidity needs, including
possible collateral requirements by its AIG Financial Products Corp. (AIG-FP)
subsidiary. However, at the same time, it will reduce the insurance
subsidiaries' capital resources, at least temporarily. Assuming current
market conditions persist, we expect that AIG will continue to pursue
additional access to liquidity and the sale of certain businesses to cover
potential further investment losses.
The primary source of the strain comes from credit default swaps covering
multi-sector collateralized debt obligations with mortgage exposure as well as
insurance company holdings of residential mortgage-backed securities (RMBS).
Standard & Poor's continues to view the reported market-value losses on CDS of
more than $25 billion and $12 billion of impairments on RMBS to exceed the
ultimate economic loss. Although some recoveries are likely, given continued
depressed market values, it is unlikely that any gains will be recorded
before late 2009 or 2010.
"The ratings remain on CreditWatch pending the completion of the asset
transfer to the parent, the implementation of further liquidity options, and
the successful sale of at least a portion of the business assets," Mr. Clark
added. "If these steps are successful and if the deterioration in
mortgage-related assets appears to be manageable with the newly raised
capital, then we could removed the ratings from CreditWatch and affirm them.
However, if these steps are not successful or if mortgage-related losses
continue to worsen, then we could lower the ratings into the 'BBB' category."
Complete ratings information is available to subscribers of RatingsDirect,
the real-time Web-based source for Standard & Poor's credit ratings, research,
and risk analysis, at www.ratingsdirect.com. All ratings affected by this
rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com; select your preferred country or region, then
Ratings in the left navigation bar, followed by Credit Ratings Search.
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), is
the world's foremost provider of financial market intelligence, including
independent credit ratings, indices, risk evaluation, investment research and
data. With approximately 8,500 employees, including wholly owned affiliates,
located in 23 countries and markets, Standard & Poor's is an essential part of
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than 140 years in providing investors with the independent benchmarks they
need to feel more confident about their investment and financial decisions.
For more information, visit http://www.standardandpoors.com.
SOURCE Standard & Poor's
Jeff Sexton, New York, (1) 212-438-3448 jeff_sexton@standardandpoors.com
Analyst Contacts: Rodney A Clark, FSA, New York (1) 212-438-7245 Steven Ader,
New York (1) 212-438-1447 Kevin Ahern, New York (1) 212-438-7160 Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_relations@standardandpoors.com Americas Customer Service: (1)
212-438-7280 research_request@standardandpoors.com
