Ratings Agencies Respond to AIG Plan

Despite AIG’s heavy losses—including a net loss of US$99.3
billion for 2008–ratings agencies are cautiously supporting the company’s
massive restructuring plan.

Major analysts like A.M. Best and Standard &Poor’s kept AIG’s
ratings unchanged, in light of year-end losses and a US$61 billion loss
in the fourth quarter of 2008. A.M. Best maintained the company’s
financial strength (A-) and issuer credit ratings to “reflect the
continued commitment of the U.S. government to support AIG’s financial
position,” the agency notes in a statement. However, the agency
also maintains a “negative” rating outlook for the company,
due to exposure at AIG Financial Products and ongoing challenges—such
as employee turnover and stiff competition—in its core franchise.
The agency acknowledges that the company’s planned spin-off of
its P&C operations “should help alleviate these concerns.” A.M.
Best will finalize its annual review of AIG’s companies in the
next few months, it notes in a statement.

Standard & Poor’s removed AIG’s ratings from CreditWatch—where
they’ve been under negative implications since November, 2008–
affirming  A+ counterparty credit and financial strength ratings
for the company’s insurance subsidiaries and the A-/A-1 counterparty
credit rating for American International Group Inc. “The ratings
reflect a
combination of the extraordinary external support from the U.S. government
in
light of AIG’s status as a highly systemically important financial institution.
We expect this support to be ongoing during AIG’s period of stress,” Kevin
Ahern, an S&P credit analyst, notes in the statement.  The outlook
for all AIG companies, however, remains negative, due poor market conditions
delaying the sale of AIG’s life assets, and as the agency  “believe[s]
AIG is particularly susceptible to these broader market trends given
its somewhat weakened position.”

This story was originally published by Canadian Insurance Top Broker.