MOODY'S CONFIRMS RATINGS OF AMERICAN INTERNATIONAL GROUP, INC. (SENIOR UNSECURED AT Aa2; STABLE OUTLOOK) AND CERTAIN SUBSIDIARIES; RATINGS OF GENERAL INSURANCE SUBSIDIARIES REMAIN UNDER REVIEW
Company Files 2004 Form 10-K With Restated Financial Statements
New York, May 31, 2005 -- Moody's Investors Service has confirmed its long-term senior debt
ratings on American International Group, Inc. (NYSE:
AIG) at Aa2 and has revised the outlook for these ratings to stable.
The debt ratings of several supported entities and the insurance financial
strength ratings of members of AIG's life insurance and mortgage
insurance subsidiaries have also been confirmed with stable outlooks.
Insurance financial strength ratings on members of AIG's domestic general
insurance group remain on review for possible downgrade, pending
the filing of amended financial statements for these companies with state
regulatory authorities.
The short-term Prime-1 debt ratings of AIG Funding,
Inc. and AIG Liquidity Corp. are not affected and are confirmed
with stable outlooks, and the short-term (Prime-1)
and long-term (senior unsecured at A1) ratings of the company's
principal aircraft leasing and commercial and consumer finance subsidiaries
International Lease Finance Corporation and American General Finance Corporation)
are likewise not affected and have been affirmed with stable outlooks.
Moody's added that it will be assessing whether revisions may be appropriate
for other ratings that benefit from AIG support or that of its subsidiaries,
including preferred securities issued by certain institutional funding
vehicles.
These rating confirmations follow the company's filing earlier today of
its 2004 Form 10-K with the SEC, in which AIG has restated
its financial statements for the first three quarters of 2004 and for
the full years 2003, 2002, 2001 and 2000. AIG reported
consolidated shareholders' equity at December 31, 2004 of $80.61
billion, a reduction of $2.26 billion or 2.7
percent from the previously reported unaudited consolidated shareholders'
equity of $82.87 billion at December 31, 2004.
Moody's noted that AIG's 10-K filing highlights a number
of additional areas of financial restatement or re-estimation beyond
those discussed in AIG's 8-K filing of May 1, 2005,
including adjustments related to certain life settlement businesses,
deferred taxes, and estimates for asbestos and environmental-related
liabilities at the group's general insurance operations.
Additionally, Moody's noted the filing of a civil lawsuit
against AIG and its former CEO and CFO by the New York State Attorney
General and the New York State Superintendent of Insurance on May 26.
Moody's commented previously that a favorable resolution of internal
and external accounting reviews, including filing of the company's
10-K annual report with the SEC on or before May 31, 2005
would likely lead to a confirmation of the Aa2 senior debt rating.
The rating agency noted that the stable outlook is predicated on Moody's
expectation that ongoing civil actions, regulatory investigations
and associated costs will be manageable in the context of the group's
overall earnings power, and will not implicate a broader group of
current management.
Moody's added that it expects that AIG will incur additional costs
associated with the settlement of civil actions - including litigation
costs, regulatory settlements and potential restitution payments.
Moreover, given a continued pattern of adverse reserve development
at AIG's domestic general insurance operations, further additions
over the coming year to reserves on business written in prior years remain
a possibility. However, the rating agency said that it expects
that that the magnitude of such further costs, together with adjustments
or restatements taken to date, will remain well within a 10%
margin of shareholders' equity as reported at September 30, 2004
(a benchmark that Moody's has referenced in its previous comments on the
rating review process) and well manageable within the group's current
pace of earnings and internal capital generation. Moody's
noted that it expects to resolve the review of the insurance financial
strength ratings of members of AIG's domestic general insurance
group shortly after the filing of those companies' revised financial statements
with state insurance regulators, and that an updated assessment
of the group's core reserves will be a central component of that
review. Moody's further noted that it expects that the review of
the ratings of members of AIG's domestic general insurance group
will result in either a confirmation of the ratings at Aa2 or a lowering
by one notch (Aa3), and that AIG's other ratings and stable
outlook will not be affected.
Moody's views positively the fact that AIG, Inc. and AIG
Funding, Inc. have received waivers to certain covenants
in their combined 5-year and 364-day bank credit agreements
with respect to the filing of AIG's first quarter 10-Q, which
the company now expects to file by the end of June.
Moody's also notes that AIG's Board has continued to act quickly and aggressively
to address both accounting related issues and regulatory investigations
through an intensified internal review and associated management changes,
as well as recent changes to the composition of the Board of Directors
itself. Moody's believes that there is the potential for further
management changes at AIG, at least below the senior executive level,
as the company and the Board seek to strengthen leadership in key operational
and control-related areas, and that the composition and structure
of the Board will likely evolve as well, to tighten its oversight
processes and capabilities.
Despite its recent challenges, however, Moody's believes that
AIG will continue to distinguish itself as the leading global insurance
enterprise, in terms of business breadth, consolidated revenues
and earnings, and market capitalization. The rating agency
added that the group maintains excellent market positions and franchise
strength in each of its major business segments: US and international
general insurance, life insurance, consumer and commercial
finance, and retirement services. Moody's also noted that
AIG's financial flexibility is supported by its formidable business franchise
value, strong and stable earnings capacity, robust internal
capital generation, modest holding company financial leverage,
very high fixed-charge coverage, and a favorable liquidity
profile.
The following long-term debt ratings of AIG, Inc.
and its supported debt-issuing subsidiaries have been
confirmed with a stable outlook:
American International Group, Inc. - senior unsecured
debt at Aa2;
American General Corporation - guaranteed senior unsecured debt
at Aa2;
American General Capital II, III - guaranteed trust preferred
securities at Aa3;
American General Institutional Capital A and B - guaranteed trust
preferred stock at Aa3;
AIG Financial Products Corp. - guaranteed senior unsecured
debt at Aa2;
AIG Financial Products (Japan) Ltd. - guaranteed senior
unsecured debt at Aa2;
AIG Matched Funding Corp. - guaranteed senior unsecured
debt at Aa2;
AIG-FP Matched Funding Corp. - guaranteed senior
unsecured debt at Aa2;
Banque AIG SA - guaranteed senior unsecured debt at Aa2;
SunAmerica Inc. - supported senior unsecured debt at Aa2;
supported convertible preferred at A1;
AIG SunAmerica Institutional Funding I, II and III (Jersey) Limited
-- funding agreement-backed senior debt at Aa2;
AIG SunAmerica Global Financing III, IV, V, VI,
VII, IX, XI, XII, XIII, XIV, XV,
XVI, XVII, XVIII, XIX, XX, XXI,
XXII, XXIII, XXIV, XV, XVI, XVII,
XVIII, XXIX, XXX -- funding agreement-backed
senior debt at Aa2.
Ratings on the guaranteed debts of AIG's debt-issuing subsidiaries
reflect the existence of an unconditional and irrevocable guarantee from
AIG Inc. with respect to these obligations. Also following
a review of its support, the senior unsecured debt rating of AIG-FP
Capital Funding Corp has been lowered to Aa2, with a stable outlook.
Ratings on the funding agreement backed notes of AIG SunAmerica entities
reflect their direct support from members of the SunAmerica Life Insurance
group (see below) as well as the SunAmerica companies' explicit support
from AIG Inc.
The following insurance financial strength ratings have been confirmed
with stable outlooks:
Members of AIG's Life Insurance and Retirement Services Group:
AIG Annuity Insurance Company - insurance financial strength rating
at Aa1;
American General Life & Accident Insurance Company - insurance
financial strength rating at Aa1;
American General Life Insurance Company - insurance financial strength
rating at Aa1;
American International Life Assurance Company of New York - insurance
financial strength
rating at Aa1.
AIG Life Insurance Company - insurance financial strength rating
at Aa1;
United States Life Insurance Company in the City of New York -
insurance financial strength rating at Aa1;
Variable Annuity Life Insurance Company - insurance financial strength
rating at Aa1;
SunAmerica Life Insurance Company - insurance financial strength
rating at Aa2;
First SunAmerica Life Insurance Company - insurance financial strength
rating at Aa2;
AIG SunAmerica Life Assurance Company - insurance financial strength
rating at Aa2;
American International Assurance Company (Bermuda) Ltd. (AIAB)
- insurance financial strength
rating at Aa2;
American Life Insurance Company (ALICO) - insurance financial strength
rating at Aa2;
AIG Edison Life Insurance Company - insurance financial strength
rating at Aa2;
Members of AIG's Mortgage Insurance Group:
United Guaranty Residential Insurance Company (UGRIC) - insurance
financial strength rating affirmed at Aa2;
United Guaranty Mortgage Indemnity Company (UGMIC) - insurance
financial strength rating affirmed at Aa2;
United Guaranty Residential Insurance Company of North Carolina (UGRIC
NC) - insurance
financial strength rating confirmed at Aa2.
Moody's views AIG's Domestic Life operations as an integrated business
unit with a shared AIG brand, whose stand-alone creditworthiness
supports a rating level that is higher than the parent's. The ratings
of the SunAmerica companies carry AIG Inc.'s senior unsecured rating
level, because their intrinsic ratings are viewed by Moody's as
being below that of AIG Inc., which provides explicit support
to their ratings. The ratings of ALICO and AIG Edison were confirmed
because the Japanese operations are viewed by Moody's as an integrated
business unit whose ratings benefit from strong implicit parental support,
given that Moody's considers AIG's Japanese operations as being a core
franchise.
The stable outlooks on UGRIC and UGMIC reflect Moody's view that these
companies' intrinsic financial strength, irrespective of parental
support, sustains their current ratings, and the confirmation
of UGRIC NC's rating reflects its support from AIG Inc.
The following unsupported insurance financial strength ratings of members
of AIG's domestic general insurance group remain under review for possible
downgrade:
National Union Fire Insurance Company of Pittsburgh, PA -
insurance financial strength at Aa2;
American Home Assurance Company - insurance financial strength
at Aa2;
Birmingham Fire Insurance Company of Pennsylvania - insurance financial
strength at Aa2;
Commerce & Industry Insurance Company - insurance financial
strength at Aa2;
AIU Insurance Company - insurance financial strength at Aa2;
New Hampshire Insurance Company - insurance financial strength
at Aa2;
Insurance Company of the State of Pennsylvania - insurance financial
strength at Aa2;
American International Specialty Lines Insurance Company - insurance
financial strength at Aa2;
Transatlantic Reinsurance Company - insurance financial strength
rating at Aa2.
The following short-term ratings have been affirmed with a stable
outlook:
AIG Financial Products Corp. - backed short-term
rating at Prime-1;
AIG Funding, Inc. - rating for backed commercial paper
at Prime-1;
AIG Liquidity Corp. - backed short-term debt rating
at Prime-1;
AIG Matched Funding Corp. - backed short-term rating
at Prime-1;
AIG SunAmerica Life Assurance Company - backed short-term
insurance financial strength rating at Prime-1;
First SunAmerica Life Insurance Company - backed short-term
insurance financial strength rating at Prime-1;
SunAmerica Life Insurance Company - backed short-term insurance
financial strength rating at Prime-1;
International Lease Finance Corporation - senior unsecured debt
at A1, rating for commercial paper at Prime-1;
American General Finance Corporation - senior unsecured debt at
A1, rating for commercial paper at Prime-
1;
American General Finance, Inc. - rating for commercial
paper at Prime-1;
Commo Loco, Inc. - commercial paper rating at Prime-1.
American International Group, Inc. (NYSE: AIG),
based in New York City, is the leading international insurance and
financial services organization, with operations in more than 130
countries and jurisdictions. The company is engaged through its
subsidiaries in international property and casualty insurance, life
insurance, retirement services, asset management and financial
services.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to repay punctually senior policyholder claims
and obligations. For more information, visit our website
at www.moodys.com/insurance.
New York
Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
