Moody's downgrades AIG (senior to A2); LT and ST ratings under review
New York, September 15, 2008 -- Moody's Investors Service has downgraded the senior unsecured debt rating
of American International Group, Inc. (NYSE: AIG) to
A2 from Aa3 in light of the continuing deterioration in the US housing
market and the consequent impact on the group's liquidity and capital
position due to its related investment and derivative exposures.
The company's long-term and Prime-1 short-term
ratings were placed on review for possible further downgrade. The
company has developed a wide-ranging plan to address capital and
liquidity risks which includes raising funds via secured borrowings,
asset sales and other capital sources. If successful, these
actions would likely stabilize the ratings at current levels, although
significant execution risk exists with respect to some elements of that
plan, especially given the current level of instability in capital
markets. Moody's noted, however, that further
downgrades of the parent and certain operating units are likely if the
immediate liquidity and capital concerns are not fully addressed.
Such downgrades could amount to multiple notches.
Moody's said that the primary insurance operations are fundamentally
solid but are nevertheless subject to increased pressure due to investment
deterioration and the negative reputational impact of losses within the
group's financial products business. The holding company
downgrade to A2 and continuing review reflect the losses at certain insurance
and financial products units as well as the severe implications of those
losses -- and continuing exposures -- for capital and liquidity.
The dislocation in AIG's holding company financial position is considered
by Moody's to be indicative of a risk profile that is not consistent
with a rating in the Aa range, even if near term stresses on capital
and liquidity are successfully remediated. The current volatility
in AIG's stock price and borrowing spreads have made it more difficult
to address the company's immediate liquidity and capital needs through
traditional capital market issuance; however, the company may
be able to address these needs through alternative means.
The review of AIG's ratings will focus on execution of the company's
pending strategic and financial plans, with specific emphasis on
how effectively they 1) re-establish the company's robust
liquidity position, 2) re-define the group strategy,
3) contain and reduce risk within the financial products unit, 4)
re-build capitalization, and 5) reduce the risk of reputation
damage to AIG's business in domestic and international markets.
Moody's has also downgraded the ratings of several AIG subsidiaries (see
list below), including the Domestic Life Insurance and Retirement
Services companies (DLIRS -- insurance financial strength rating
(IFSR) to Aa3 from Aa2); American Life Insurance Company (IFSR to
Aa3 from Aa2); AIG Edison Life Insurance Company (IFSR to Aa3 from
Aa2); AIG UK Limited (IFSR to A1 from Aa3); AIG Capital Corporation
(senior unsecured debt to Baa1 from A2, short-term debt to
Prime-2 from Prime-1); American General Finance Corporation
(senior unsecured debt to A3 from A1, short-term debt to
Prime-2 from Prime-1); and International Lease Finance
Corporation (senior unsecured debt to A3 from A1; short-term
debt to Prime-2 from Prime-1). Nearly all of AIG's
subsidiary ratings remain on review for possible further downgrade.
Moody's affirmed the Aa3 IFS rating of Transatlantic Reinsurance
Company (TRC), while lowering the senior unsecured debt rating of
Transatlantic Holdings, Inc. (NYSE: TRH) to A3 from
A2. The TRH debt rating previously incorporated one notch of rating
uplift from AIG's 59% ownership stake, but Moody's
increasingly assesses TRH on a stand-alone basis. The rating
outlook for TRC and TRH is stable.
AIG remains one of the world's largest and most diversified insurance
firms, said Moody's, with leading market positions in
many business lines and geographic regions. The insurance financial
strength ratings of the major operating units, currently in the
Aa range, reflect their strong intrinsic business and financial
profiles as well as Moody's expectation that AIG will take whatever
steps possible to protect these operations.
The last rating action on AIG took place on August 7, 2008,
when Moody's affirmed the parent company's ratings and reiterated
the negative outlook. Moody's also affirmed the insurance
financial strength ratings of the DLIRS companies while changing the outlook
to negative from stable.
Moody's will host a teleconference to discuss these actions on Tuesday,
September 16th, at 11:00 AM EDT. Please visit www.moodys.com/events
for further information.
Moody's has downgraded the following ratings and placed them on review
for possible further downgrade:
American International Group, Inc. -- long-term
issuer rating to A2 from Aa3, senior unsecured debt to A2 from Aa3,
subordinated debt to A3 from A1, senior unsecured debt shelf to
(P)A2 from (P)Aa3, subordinated debt shelf to (P)A3 from (P)A1,
preferred stock shelf to (P)Baa1 from (P)A2;
AGFC Capital Trust I -- backed preferred stock to Baa2 from
A3;
AIG Capital Corporation -- long-term issuer rating
to Baa1 from A2;
AIG Capital Trusts I & II -- backed trust preferred
stock shelf to (P)A3 from (P)A1;
AIG Edison Life Insurance Company -- insurance financial
strength to Aa3 from Aa2;
AIG Life Holdings (US), Inc. -- backed senior
unsecured debt to A2 from Aa3;
AIG Program Funding, Inc. -- backed senior
unsecured debt shelf to (P)A2 from (P)Aa3;
AIG Retirement Services, Inc. -- backed senior
unsecured debt to A2 from Aa3, backed preferred stock to Baa1 from
A2;
AIG UK Limited -- insurance financial strength to A1 from
Aa3;
American General Capital II -- backed trust preferred stock
to A3 from A1;
American General Finance Corporation -- long-term
issuer rating to A3 from A1, senior unsecured debt to A3 from A1;
American General Institutional Capital A & B -- backed
trust preferred stock to A3 from A1;
American Life Insurance Company -- insurance financial strength
to Aa3 from Aa2;
Capital Markets subsidiaries -- AIG Financial Products Corp.,
AIG Matched Funding Corp., AIG-FP Capital Funding
Corp., AIG-FP Matched Funding Corp.,
AIG-FP Matched Funding (Ireland) P.L.C.,
Banque AIG -- backed senior unsecured debt to A2 from Aa3;
Domestic Life Insurance & Retirement Services subsidiaries --
AIG Annuity Insurance Company, AIG Life Insurance Company,
American General Life and Accident Insurance Company, American General
Life Insurance Company, American International Life Assurance Company
of New York, The United States Life Insurance Company in the City
of New York, The Variable Annuity Life Insurance Company --
insurance financial strength to Aa3 from Aa2;
AIG SunAmerica funding agreement-backed note programs --
AIG SunAmerica Global Financing Trusts, ASIF I & II, ASIF
III (Jersey) Limited, ASIF Global Financing Trusts --
senior secured debt to Aa3 from Aa2;
AIG SunAmerica subsidiaries -- AIG SunAmerica Life Assurance
Company, First SunAmerica Life Insurance Company, SunAmerica
Life Insurance Company -- insurance financial strength to
Aa3 from Aa2;
ILFC E-Capital Trusts I & II -- backed preferred
stock to Baa2 from A3;
International Lease Finance Corporation -- senior unsecured
debt to A3 from A1, preferred stock to Baa2 from A3, senior
unsecured debt shelf to (P)A3 from (P)A1;
Mortgage Guaranty subsidiaries (second-lien and student loans)
-- United Guaranty Commercial Insurance Company of North
Carolina, United Guaranty Residential Insurance Company of North
Carolina -- backed insurance financial strength to A3 from A1.
Moody's has downgraded the following ratings and assigned a negative
outlook:
AIG Capital Corporation -- short-term issuer rating
to Prime 2 from Prime 1;
American General Finance Corporation -- short-term
debt to Prime 2 from Prime-1;
American General Finance, Inc. -- short-term
debt to Prime-2 from Prime-1;
CommoLoco, Inc. -- backed short-term
debt to Prime-2 from Prime-1;
International Lease Finance Corporation -- short-term
debt to Prime-2 from Prime-1.
Moody's has placed the following ratings on review for possible
downgrade:
American International Group, Inc. -- short-term
issuer rating at Prime-1;
AIG Financial Products Corp. -- backed short-term
debt at Prime-1;
AIG Funding, Inc. -- backed short-term
debt at Prime-1;
AIG General Insurance (Taiwan) Co., Ltd. --
insurance financial strength at A1;
AIG Liquidity Corp. -- backed short-term debt
at Prime-1;
AIG Matched Funding Corp. -- backed short-term
debt at Prime-1;
AIG SunAmerica subsidiaries -- AIG SunAmerica Life Assurance
Company, First SunAmerica Life Insurance Company, SunAmerica
Life Insurance Company -- short-term insurance financial
strength at Prime-1;
American International Assurance Company (Bermuda) Limited --
insurance financial strength at Aa3;
Commercial Insurance Group subsidiaries -- AIG Casualty
Company; AIU Insurance Company; American Home Assurance Company;
American International Specialty Lines Insurance Company; Commerce
and Industry Insurance Company; National Union Fire Insurance Company
of Pittsburgh, Pennsylvania; New Hampshire Insurance Company;
The Insurance Company of the State of Pennsylvania -- insurance
financial strength at Aa3;
Mortgage Guaranty subsidiaries (first-lien loans) --
United Guaranty Mortgage Indemnity Company, United Guaranty Residential
Insurance Company -- backed insurance financial strength at Aa3.
Moody's has downgraded the following rating and assigned a stable
outlook:
Transatlantic Holdings, Inc. -- senior unsecured
debt to A3 from A2, senior unsecured debt shelf to (P)A3 from (P)A2,
subordinated debt shelf to (P)Baa1 from (P)A3.
Moody's has affirmed the following rating with a stable outlook:
Transatlantic Reinsurance Company -- insurance financial
strength at Aa3.
AIG, based in New York City, is a leading international insurance
and financial services organization, with operations in more than
130 countries and jurisdictions. The company is engaged through
subsidiaries in General Insurance, Life Insurance & Retirement
Services, Financial Services and Asset Management. AIG reported
total revenues of $19.9 billion and a net loss of $5.4
billion for the second quarter of 2008. Shareholders' equity was
$78.1 billion as of June 30, 2008.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually pay senior policyholder claims and
obligations. For more information, please visit our website
at www.moodys.com/insurance.
New York
Bruce Ballentine
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