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Rating Action:

MOODY'S REVIEWS A2 DEBT RATINGS OF AMERICAN GENERAL CORP AND AMERICAN GENERAL FINANCE CORP FOR POSSIBLE UPGRADE; CONFIRMS SUBSIDIARY INSURANCE FINANCIAL STRENGTH AND SHORT-TERM RATINGS

12 Mar 2001
MOODY'S REVIEWS A2 DEBT RATINGS OF AMERICAN GENERAL CORP AND AMERICAN GENERAL FINANCE CORP FOR POSSIBLE UPGRADE; CONFIRMS SUBSIDIARY INSURANCE FINANCIAL STRENGTH AND SHORT-TERM RATINGS

Approximately $18 Billion of Securities Affected

New York, March 12, 2001 -- Moody's Investors Service has placed the A2 senior debt ratings of American General Corporation (AGC) and American General Finance Corporation (AGFC), its wholly owned finance subsidiary, on review for possible upgrade. Other AGC long-term debt and affiliate preferred stock ratings were also placed on review for possible upgrade. The Prime-1 commercial paper ratings of AGC, AGFC, and of American General Finance Inc. (AGFI -- AGFC's holding company) were confirmed, as were the Aa2 insurance financial strength rating of Variable Annuity Life Insurance Company (VALIC), and the Aa3 insurance financial strength rating of American General Annuity Insurance Company (AGAIC). The Aa3 insurance financial strength ratings of other AGC life insurance subsidiaries were also confirmed (see below for a complete listing of ratings reviewed for upgrade and ratings confirmed).

The rating reviews and confirmations follow today's announcement by AGC and Prudential plc of the United Kingdom (Prudential) to merge their respective operations in a tax-free, all-stock transaction valued at $26.5 billion, based on a merger ratio of 3.6622 Prudential shares for each share of AGC common stock. The transaction, which will create a major global financial services business with leading market positions in the U.S., the U.K., and Asia, is expected to close during the third quarter of 2001, subject to various regulatory and shareholder approvals.

According to the rating agency, the review for possible upgrade of the long-term debt and preferred stock ratings of AGC, AGFC and other AGC affiliates will focus on the potential merger benefits of the combined entity in terms of scale, and revenue and earnings growth prospects. The review will also focus on the combined entity's financial leverage, capital, and any support arrangements from Prudential on behalf of AGC, and particularly, AGFC, whose ratings have benefitted from support from AGC. The execution and integration risks of combining two major financial service organizations will also be reviewed.

Commenting on the insurance financial strength rating confirmations, Moody's noted that AGC would remain a leader in the retirement services market through VALIC, a tax-qualified annuity specialist, and through AGAIC, a non-qualified annuity provider through banks, as well as a major U.S. life insurance provider through other life insurance subsidiaries (see list below). The rating agency added that AGC's life and retirement services operations were complimentary to those of Prudential's U.S. subsidiaries, Jackson National Life and PPM America, which will be integrated into those of AGC, with cost savings expected to result by the end of 2002. The Aa3 insurance financial strength rating of Jackson National Life was confirmed in a separate press release discussing Prudential's ratings.

Expanding upon the AGC commercial paper confirmation, the rating agency said that AGC's Prime-1 commercial paper rating demonstrates its continuing superior ability to repay senior short-term obligations, based on the strength of its operations. A Prime-1 rating is Moody's highest short-term rating.

Regarding the AGFC and AGFI commercial paper rating confirmations, Moody's noted that the Prime-1 ratings reflect its expectation that the finance company would remain an important element of the combined enterprise's business strategy, with continuing support from AGC and Prudential. The ratings are also based on AGFC's well-established presence in the consumer finance industry and its sound historical performance.

RATING ACTIONS

The following ratings were placed on review for possible upgrade:

American General Corporation: senior debt of A2; junior subordinated debt of A3, as well as prospective ratings of (P)A2 senior debt, (P)A3 senior subordinated debt, (P)A3 junior subordinated debt and (P)"a2" preferred stock under a shelf registration;

American General Capital, L.L.C.: preferred stock rating of "a2";

American General Institutional Capital A: preferred stock rating of "a2";

American General Institutional Capital B: preferred stock rating of "a2";

American General Capital I-III: preferred stock rating of "a2";

American General Capital IV: preferred stock rating of (P)"a2";

Western National Corporation: senior debt of A2;

American General Finance Corporation: senior debt of A2; issuer rating of A2; prospective senior debt rating of (P)A2;

The following ratings were confirmed:

American General Corporation: commercial paper rating at Prime-1;

American General Finance Corporation: commercial paper rating at Prime-1, extendible commercial notes at Prime-1;

American General Finance, Inc.: commercial paper rating at Prime-1;

CommoLoCo, Inc.: commercial paper rating at Prime-1;

Variable Annuity Life Insurance Company: insurance financial strength at Aa2;

American General Annuity Insurance Company: insurance financial strength at Aa3;

American General Life & Accident Insurance Company: insurance financial strength at Aa3;

American General Life Insurance Company: insurance financial strength at Aa3;

Franklin Life Insurance Company: insurance financial strength at Aa3;

Old Line Life Insurance Company: insurance financial strength at Aa3;

United States Life Insurance Company in the City of New York: insurance financial strength at Aa3;

All American Life Insurance Company: insurance financial strength at Aa3.

American General Corporation is a U.S. financial services company with key operations in the retirement services, life insurance and consumer finance sectors. At December 31, 2000, the company had consolidated GAAP equity of $8 billion and consolidated GAAP assets of $120 billion. The company has its headquarters in Houston, Texas.

Visit Moody's insurance Website at www.moodys.com/insurance.

New York
Robert Riegel
Managing Director
Life Insurance Team
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

New York
Laura Bazer
VP - Senior Credit Officer
Life Insurance Team
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

No Related Data.
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