MOODY'S DOWNGRADES AIG'S LONG-TERM CREDIT RATINGS TO Aa1; RATINGS PLACED ON REVIEW FOR POSSIBLE FURTHER DOWNGRADE
New York, March 31, 2005 -- Moody's Investors Service has lowered its long-term senior debt
ratings on American International Group, Inc. (NYSE:
AIG) to Aa1 from Aaa, and has placed the ratings on review for possible
further downgrade. The debt and insurance financial strength ratings
of supported entities including the group's supported life insurance
and mortgage insurance subsidiaries as well as AIG's Domestic Brokerage
insurance subsidiaries, have also been lowered to Aa1 from Aaa,
and are also on review for further possible downgrade.
The short-term Prime-1 debt ratings of AIG Funding,
Inc. and AIG Liquidity Corp. have been confirmed with a
stable outlook, and the short- and long-term ratings
of the company's principal commercial and consumer finance subsidiaries
(principally International Lease Finance and American General Finance)
are not affected. Moody's added that it will also conduct
a review of structured finance ratings that are supported by AIG and its
subsidiaries.
This rating action follows the company's announcement yesterday
that it would delay the filing of its 2004 Form 10-K with the Securities
and Exchange Commission in order to complete an extensive financial review.
The announcement also highlighted a number of areas of specific concern,
based on internal and external investigations to-date. Significantly,
ongoing regulatory investigations into the company's business and
internal reviews at AIG, have indicated that several transactions
appear to have been put in place primarily to enhance reported financial
results. The magnitude of possible financial adjustments or restatements
of prior year results is now estimated by AIG to be as much as 2%
of its shareholders equity, or approximately $1.7
billion after tax.
Moody's said that these findings are suggestive of a culture of
financial aggressiveness and of control inadequacies that are inconsistent
with disciplines of internal control, risk management, corporate
governance, and a commitment to financial conservatism that is typical
at the Aaa rating level. However, Moody's notes that
AIG's Board has acted quickly to address these issues through an
intensive internal review and associated management changes.
In placing AIG's ratings on review for possible further downgrade,
Moody's cited continuing uncertainty about the scope of ongoing
regulatory investigations, internal reviews and financial restatements
and/or adjustments. Furthermore, Moody's noted that
although it views management's decision to delay the filing of the
company's 10-K as understandable, given the recent
succession of the company's chief executive and chief financial
officers, the expanded scope of AIG's investigations and reviews
suggests a potential for further delay in the 10-K filing and additional
negative findings. Favorable resolution of these uncertainties
over the next few months would likely lead to confirmation of the Aa1
rating, while failure to make progress toward a speedy resolution,
or further significant negative revelations could well lead to another
downgrade.
Moody's continues to believe that the extent of ultimate financial restatements,
together with costs associated with potential regulatory or litigation
settlements or fines, will not likely be material to the enterprise's
overall earnings or capital strength, but noted that they do appear
to be material to those of its Domestic Brokerage Group operations,
which constitute just under one-fifth of the group's consolidated
earnings. Moody's said that it believes that AIG's core franchises
and business infrastructure are well positioned to continue to operate
without material disruption, but the rating agency added that it
believes that some of the group's more credit-sensitive businesses
could be impacted.
Despite the recent developments, Moody's believes that AIG
continues 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 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 leverage,
very high fixed-charge coverage, and favorable liquidity
profile.
The following long-term debt ratings have been downgraded and were
placed on review for possible further downgrade:
American International Group, Inc. - senior unsecured
debt to Aa1 from Aaa;
American General Corporation - guaranteed senior unsecured debt
to Aa1 from Aaa;
American General Capital II, III - guaranteed trust preferred
securities to Aa2 from Aa1;
American General Institutional Capital A and B - guaranteed trust
preferred stock to Aa2 from Aa1;
AIG Financial Products Corp. - guaranteed senior unsecured
debt to Aa1 from Aaa;
AIG Financial Products (Japan) Ltd - guaranteed senior unsecured
debt to Aa1 from Aaa;
AIG Matched Funding Corp. - guaranteed senior unsecured
debt to Aa1 from Aaa;
AIG-FP Matched Funding Corp. - guaranteed senior
unsecured debt to Aa1 from Aaa;
Banque AIG SA - guaranteed senior unsecured debt to Aa1 from Aaa.
SunAmerica Inc. - supported senior unsecured debt to Aa1
from Aaa; supported convertible preferred to Aa3 from Aa2;
AIG SunAmerica Institutional Funding I, II and III (Jersey) Limited
-- funding agreement-backed senior debt to Aa1 from
Aaa;
AIG SunAmerica Global Financing II, III, IV, V,
VI, VII, IX, XI, XIII, XIV, XV,
XVI, XVII, XVIII, XIX, XX, XXI, XXII,
XXIII, XXIV, XV, XVI, XVII, XVIII,
XXIX-- funding agreement-backed senior debt to Aa1
from Aaa.
The following insurance financial strength ratings have been downgraded
and were placed on review for possible further downgrade:
Unsupported members of AIG's Domestic Brokerage and Life Insurance
Groups:
National Union Fire Insurance Company of Pittsburgh, PA.
- insurance financial strength to Aa1 from Aaa;
American Home Assurance Company - insurance financial strength
to Aa1 from Aaa;
Birmingham Fire Insurance Company of Pennsylvania - insurance financial
strength to Aa1 from Aaa;
Commerce & Industry Insurance Company - insurance financial
strength to Aa1 from Aaa;
AIU Insurance Company - insurance financial strength to Aa1 from
Aaa;
New Hampshire Insurance Company - insurance financial strength
to Aa1 from Aaa;
Insurance Company of the State of Pennsylvania - insurance financial
strength to Aa1 from Aaa;
American International Specialty Lines Insurance Company - insurance
financial strength to Aa1 from Aaa;
American Life Insurance Company (ALICO) - insurance financial strength
rating to Aa1 from Aaa.
Supported members of AIG's Domestic and International Life Insurance
and Mortgage Insurance Groups:
AIG Life Insurance Company - supported insurance financial strength
rating to Aa1 from Aaa;
American International Life Assurance Company of New York - supported
insurance financial strength rating to Aa1 from Aaa;
SunAmerica Life Insurance Company - supported insurance financial
strength rating to Aa1 from Aaa;
First SunAmerica Life Insurance Company - supported insurance financial
strength rating to Aa1 from Aaa;
AIG SunAmerica Life Assurance Company - supported insurance financial
strength rating to Aa1 from Aaa;
American International Assurance Company (Bermuda) Ltd. -
supported insurance financial strength rating to Aa1 from Aaa;
United Guaranty Residential Insurance Company - supported insurance
financial strength to Aa1 from Aaa;
United Guaranty Residential Insurance Company of North Carolina -
supported insurance financial strength to Aa1 from Aaa;
United Guaranty Mortgage Indemnity Company - supported insurance
financial strength to Aa1 from Aaa.
The following rating, on a majority-owned subsidiary that
Moody's considers to benefit from implied support of the Domestic
Brokerage group and from the holding company, was also downgraded:
Transatlantic Reinsurance Company - insurance financial strength
rating to Aa2 from Aa1; outlook is now negative.
The following ratings were placed under review for possible downgrade:
American General Life & Accident Insurance Company - insurance
financial strength rating at Aa1 ;
American General Life Insurance Company - insurance financial strength
rating at Aa1;
AIG Annuity 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;
AIG Edison Life Insurance Company - insurance financial strength
rating at Aa1.
The following ratings were affirmed with a stable outlook:
AIG Funding, Inc. - rating for backed commercial paper
at Prime-1;
AIG Liquidity Corp. - backed short-term debt 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. - rating for commercial paper 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. AIG reported net income for the full year 2004 of $11.0
billion, and total assets and shareholders' equity of approximately
$83 billion as of December, 2004.
New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
