Despite $30B lifeline, AIG’s credit outlook remains bleak

Ratings agencies today painted a bleak outlook for AIG, following news of the insurer’s massive fourth-quarter loss and an additional $30 billion lifeline from the U.S. government.
MAR 02, 2009
By  Bloomberg
Ratings agencies today painted a bleak outlook for AIG, following news of the insurer’s massive fourth-quarter loss and an additional $30 billion lifeline from the U.S. government. Standard and Poor’s in New York today removed American International Group Inc.’s ratings from CreditWatch “negative,” but gave the insurer and its subsidiaries a negative outlook. New York-based AIG’s counterparty credit ratings have been affirmed at A-/A-1, while the insurance subsidiaries’ counterparty credit and financial strength ratings have also been affirmed at A+. All of these companies now have a negative outlook. Additionally, the insurer expects that its planned sale of its life operations will take longer than planned, partly due to the lack of liquidity in the capital markets, according to a report from S&P. That risk, along with the increased pressure on the performance of AIG’s insurance business, both contributed to the agency’s negative outlook. Meanwhile, Moody’s Investors Service, also of New York, downgraded AIG SunAmerica’s subsidiaries’ insurance financial strength to A1 from Aa3. Those companies include AIG SunAmerica Life Assurance Co. in Los Angeles, First SunAmerica Life Insurance Co. of New York and SunAmerica Life Insurance Co., also in Los Angeles. Domestic Life Insurance and Retirement Services subsidiaries, including AIG Annuity Insurance Co., AIG Life Insurance Co. and The Variable Annuity Life Insurance Co. — all of Houston — have had their insurance financial strength ratings downgraded to A1 from Aa3. Fitch Ratings Inc. of New York downgraded AIG’s hybrid securities, lowering junior subordinated and trust preferred securities to BB from A-. The AA- insurer financial strength ratings of AIG Annuity, AIG Life, SunAmerica and VALIC all remain on “Rating Watch Evolving.” The news follows on the heels of AIG’s $61.7 billion, or $22.95 per share, fourth-quarter loss, down from the carrier’s $5.3 billion, or $2.08 per share, loss in the year-ago period. Though the government’s decision to revise AIG’s recapitalization plan and provide the carrier an additional $30 billion have staved off concerns that the company’s creditworthiness will continue to rapidly crumble, S&P analyst Kevin Ahern said that there were still worries about AIG’s ability to hold on to key staff. If AIG takes a serious loss due to competitors poaching underwriting personnel and pursuing the carrier’s accounts, a downgrade may be in the cards — though likely by no more than two notches, according to Mr. Ahern’s report. However, if AIG’s businesses were to stabilize and government support was to continue, the outlook may be revised to stable.

Latest News

RIA moves: RWA Wealth Partners strengthens leadership as $8B Procyon widens Northeast footprint
RIA moves: RWA Wealth Partners strengthens leadership as $8B Procyon widens Northeast footprint

The Dynasty Financial partner firm's latest deal in Connecticut adds roughly $600 million in client assets.

Cetera names Richard Vogel to lead Cetera Advisors community
Cetera names Richard Vogel to lead Cetera Advisors community

The giant broker dealer and RIA overseeing roughly $554 billion in AUA has appointed a Merrill and BofA alum to support advisor growth.

Robinhood in talks with regulators over tokenized US equities
Robinhood in talks with regulators over tokenized US equities

Firm's CEO is confident SEC can approve without legislation.

Five-person Raymond James team jumps to Janney in Maryland
Five-person Raymond James team jumps to Janney in Maryland

The group led by a 37-year industry veteran brings $470 million in assets to the Philadelphia-based broker dealer.

$20B Merit looks to next phase as Constellation takes minority stake
$20B Merit looks to next phase as Constellation takes minority stake

The Atlanta, Georgia-based national wealth firm revealed its new PE partner as prior backers Wealth Partners Capital Group and HGGC's Aspire Holdings exited their investments.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.