Last Thursday, the ratings of American International Group Inc. (AIG) and its insurance subsidiaries were affirmed by Standard & Poor’s Ratings Services (S&P).
S&P has affirmed the ‘A-/A-1’ counterparty credit ratings on AIG and its ‘A+’ counterparty credit and financial strength ratings on its insurance subsidiaries: Chartis and SunAmerica Financial Group. However, the outlook remains negative.
According to S&P, the counterparty credit ratings reflect the U.S. government’s exceptional support provided to the company as a result of its strong position in the U.S. financial system. Additionally, the rating reflects the company’s ‘A+’ rated multi-line insurance subsidiaries.
S&P expects AIG to continue being bolstered by the government during its crisis period. However, any increase in support is not expected at this time.
The negative outlook, however, reflects the difficult conditions that AIG is facing in maintaining the operational performances of its insurance business and required capital levels, particularly in its life insurance operations.
S&P has, however, revised the stand-alone credit profile of AIG to ‘BB’ from ‘BB-‘. The stand-alone credit profile is without factoring in the significant government help being enjoyed by the holding company.
The revision is primarily due to the company’s strategic efforts in restoring its multi-line insurance market presence through its insurance subsidiaries. Additionally, the company is progressing well with its initiatives to unwind the AIG Financial Products Corp. The liquidity position of its non-insurance operations has also strengthened.
The stand-alone credit profile has a positive outlook. This basically reflects two recent divestiture deals: American International Assurance and American Life Insurance Co. The company is progressing well with these deals and the transactions are expected to close by the end of 2010.
The successful completion of these two deals would improve AIG’s financial position. This may result in an upward revision of the company’s stand-alone credit profile by two notches to investment grade by S&P.
AIG, which received federal support worth $182.5 billion that prevented its collapse in September 2008, has been trying for the past several quarters to sell assets and streamline its operations in an effort to repay the bailout money.
Reflecting positive sentiments about the company, shares of AIG increased 95 cents or 2.79% to $35.06 during Monday’s regular session on the New York Stock Exchange.
Read the full analyst report on “AIG”
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