S&P Affirms AIG’s Ratings; Outlook Still Negative

April 2, 2010

Standard & Poor’s Ratings Services has affirmed its ‘A-/A-1’ counterparty credit ratings on American International Group Inc, as well as its ‘A+’ counterparty credit and financial strength ratings on its insurance subsidiaries, Chartis and SunAmerica Financial Group. The outlook for the ratings, however, remains negative.

“The counterparty credit rating on AIG reflects our opinion of the extraordinary support from the U.S. government in light of AIG’s perceived status as a highly systemically important U.S. financial institution, as well as our view of the company’s ‘A+’ rated multiline insurance subsidiaries,” explained credit analyst Kevin Ahern. “We expect the government support to continue during AIG’s period of stress.”

S&P said the long-term counterparty credit rating on AIG includes a “five-notch uplift from our assessment of the company’s stand-alone ‘BB’ credit profile and takes into consideration the level of extraordinary government support currently provided to the company. We do not anticipate any increase in this support at this time.”

Ahern added: “We revised our assessment of AIG’s stand-alone credit profile to ‘BB’ from ‘BB-‘ to reflect the company’s continued momentum in reestablishing its multiline insurance market presence through its Chartis and SunAmerica operations, good progress in the unwinding of AIG Financial Products Corp., and the improved liquidity position of its noninsurance operations. In addition, we believe AIG’s recently announced transactions reflect solid progress in its challenging restructuring plan.”

The bulletin pointed out that the outlook on the stand-alone credit profile is positive because “we believe the successful closing of the two major acquisitions in the fourth quarter of 2010 likely will improve AIG’s financial profile. As a result, we could upwardly revise our assessment of the company’s stand-alone credit profile by two notches to investment grade.

“The ‘A+’ financial strength ratings on Chartis and related property/casualty (P/C) insurance companies reflect our view of a strong global P/C franchise that is well diversified by geographic location and product line.”

However, S&P also said the “ongoing challenges of retaining customers and key employees while continuing to generate very profitable business somewhat offset the rating strengths, in our opinion.

“The ‘A+’ financial strength ratings on the SunAmerica Financial Group (the U.S. life and retirement companies) reflect our view of its very strong, albeit weakened, competitive profile; improving operating performance, which reflects positive investment markets; and a meaningful decline in its surrender activity from peak levels. Offsetting these strengths is the ongoing pressure on capital as more investment losses in the life operations could affect our view of capital.”

Source: Standard & Poor’s – www.standardandpoors.com

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