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Fitch Rates AIG's New Sr. Unsecured Notes 'BBB'



  Fitch Rates AIG's New Sr. Unsecured Notes 'BBB'

Business Wire

CHICAGO -- August 8, 2013

Fitch Ratings has assigned a rating of 'BBB' to American International Group,
Inc.'s (AIG) $1.0 billion issuance of 3.375% senior notes due 2020. Fitch has
also affirmed all of AIG's current ratings, including AIG's Issuer Default
Rating (IDR) of 'BBB+' with a Stable Rating Outlook. A complete list of
ratings follows at the end of this release.

KEY RATING DRIVERS

Proceeds from the issue will be used for general corporate purposes, including
the retirement of debt. The new issuance will increase AIG's pro forma
financial leverage ratio (excluding financial related debt) modestly to
approximately 20% from 19% at June 30, 2013.

AIG's ratings reflect the success in restructuring and deleveraging efforts
over the last four years. The organization now more closely represents a
publicly held insurance holding company with an operating focus on global
property/casualty insurance and domestic life insurance and retirement
products.

The company's financial leverage as measured by the ratio of financial debt
and preferred securities to total capital (excluding operating debt, debt from
discontinued aircraft leasing firm International Lease Finance Corporation
(ILFC), and the impact of FAS 115) declined from 31% at year-end 2010 to
approximately 19% currently. Fitch's Total Financial Commitment (TFC) ratio,
while still high compared to most insurance peers, has improved from 2.5x at
year-end 2010 to a current level of 1.2x.

Further anticipated reductions in consolidated leverage have been slowed by
delays in closing AIG's announced sale of 90% ownership of International Lease
Finance Corporation (ILFC). AIG reported a $4.1 billion pre-tax loss from
discontinued operations in the fourth quarter of 2012 relating to ILFC in
anticipation of the sale.

Fitch believes that AIG's operating earnings-based interest coverage from its
core AIG Property Casualty and Life and Retirement operations has improved,
but still remains below Fitch guidelines for its senior debt rating.
Consolidated GAAP earnings-based interest coverage was 5.0x through June 30,
2013 up from 3.2x in 2012. Fitch also looks at operating earnings-based
coverage potential of the ongoing insurance operations on interest costs
related to AIG's financial debt. Coverage on this basis was 7.1x through June
30, 2013 up from 3.8x in 2012. Improving coverage under both calculations to a
level of consistently above 7.0x would be a rating positive. Coverage of 9.0x
would be viewed as strong for the rating category.

AIG life and retirement subsidiary ratings are supported by its solid
statutory capital position and return to stronger operating profits and
earnings stability. Fitch believes the company has largely recovered from the
effects of the financial crisis and is capable of consistently generating $4
billion of annual run-rate operating earnings.

Surrender activity has stabilized and is currently at or below historic levels
and is now reflective of the low interest rate environment rather than
AIG-specific issues. Net investment spreads have improved as a result of an
increase in base yields due to the reinvestment of cash and short-term
investments in 2011 combined with lower interest credited. These positive
factors are offset somewhat by concerns regarding the effect of continued very
low interest rates on product performance and future profitability.

AIG property casualty subsidiary ratings consider the company's unique market
position in the global insurance market given its absolute size, product
capabilities and geographic scope. Operating and underwriting performance has
lagged peer and industry norms over the last five years. AIG has taken
significant measures recently to reposition the business mix and invest in
underwriting and claims technology. These activities, coupled with favorable
pricing trends in the last 2 years have started to generate some loss ratio
improvement. Through the first six months of 2013 the company reported a
combined ratio of 100.0%, down 2.3 points from the same period in 2012.

RATING SENSITIVITIES

Key triggers that could lead to future rating upgrades include:

--Demonstration of higher and more consistent earnings within Property
Casualty or Life & Retirement operating segments that translate into average
earnings-based interest coverage above 7.0x; This would correspond with
operating earnings of approximately $11 billion;
--Further improvement in AIG's capital structure and leverage metrics that
reduce the company's TFC ratio to below 0.7x;
--A shift towards consistent underwriting profits would promote positive
movement in the property/casualty subsidiary financial strength ratings.

Key triggers that could lead to a future rating downgrade include:

--Increases in financial leverage as measured by financial debt to total
capital to a sustained level above 30%, or a material increase in the TFC
ratio from current levels;
--Large underwriting losses and/or heightened reserve volatility of the
company's non-life insurance subsidiaries that Fitch views as inconsistent
with that of comparably-rated peers and industry trends;
--Deterioration in the company's domestic life subsidiaries' profitability
trends;
--Material declines in RBC ratios at either the domestic life insurance or the
non-life insurance subsidiaries, and/or failure to achieve the above noted
capital structure improvements.

Fitch has assigned the following rating:
--USD1.0 billion of 3.375% senior unsecured notes due Aug. 15, 2020 'BBB'.

Fitch has affirmed the following ratings:

AGC Life Insurance Company
American General Life Insurance Company
The Variable Annuity Life Insurance Company
United States Life Insurance Company in the City of New York
--Insurer Financial Strength (IFS) ratings at 'A+'; Stable Outlook.

AIU Insurance Company
American Home Assurance Company
Chartis Casualty Company
AIG Europe Limited
AIG MEA Insurance Company Limited
American International Overseas Limited
Chartis Property Casualty Company
Chartis Specialty Insurance Company
Commerce & Industry Insurance Company
Granite State Insurance Company
Illinois National Insurance Company
Insurance Company of the State of Pennsylvania
Lexington Insurance Company
National Union Fire Insurance Company of Pittsburgh, PA
New Hampshire Insurance Company
--Insurer Financial Strength (IFS) ratings at 'A'; Stable Outlook.

American International Group, Inc.
--Long-term IDR at 'BBB+' Outlook Stable.

AIG International, Inc.
--Long-term IDR at 'BBB+', Outlook Stable;
--USD175 million of 5.60% senior unsecured notes due July 31, 2097 at 'BBB'.

American International Group, Inc.
--Various senior unsecured note issues at 'BBB';
--USD$1.5 billion of 4.875% senior unsecured notes due June 2022 at 'BBB'.
--USD1.2 billion of 4.250% senior unsecured notes due Sept. 15, 2014 at 'BBB';
--USD800 million of 4.875% senior unsecured notes due Sept. 15, 2016 at 'BBB';
--EUR420.975 million of 6.797% senior unsecured notes due Nov. 15, 2017 at
'BBB';
--GBP323.465 million of 6.765% senior unsecured notes due Nov. 15, 2017 at
'BBB';
--GBP338.757 million of 6.765% senior unsecured notes due Nov. 15, 2017 at
'BBB';
--USD256.161 million of 6.820% senior unsecured notes due Nov. 15, 2037 at
'BBB'.
--USD250 million of 2.375% subordinated notes due Aug. 24, 2015 at 'BBB-';
--EUR750 million of 8.00% series A-7 junior subordinated debentures due May
22, 2038 at 'BB+';
--USD 4 billion of 8.175% series A-6 junior subordinated debentures due May
15, 2058 at 'BB+';
--GBP309.850 million of 5.75% series A-2 junior subordinated debentures due
March 15, 2067 at 'BB+';
--Eur409.050 million of 4.875% series A-3 junior subordinated debentures due
March 15, 2067 at 'BB+';
--GBP900 million of 8.625% series A-8 junior subordinated debentures due May
22, 2068 at 'BB+';
--USD687.581 million of 6.25% series A-1 junior subordinated debentures due
March 15, 2087 at 'BB+'.

AIG Life Holdings, Inc.
--Long-term IDR at 'BBB+'; Outlook Stable.
--USD150 million of 7.50% senior unsecured notes due July 15, 2025 at 'BBB';
--USD150 million of 6.625% senior unsecured notes due Feb. 15, 2029 at 'BBB';
--USD300 million of 8.50% junior subordinated debentures due July 1, 2030 at
'BB+';
--USD500 million of 7.57% junior subordinated debentures due Dec. 1, 2045 at
'BB+'.
--USD500 million of 8.125% junior subordinated debentures due March 15, 2046
at 'BB+'.

ASIF II Program
ASIF III Program
ASIF Global Financing
--Program ratings at 'A'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology'(Jan. 11, 2013).

Applicable Criteria and Related Research:
Insurance Rating Methodology ¬タヤ Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=698731

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799019
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Contact:

Fitch Ratings
Primary Analyst
James B. Auden, CFA, +1-312-368-3146
Managing Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago IL 60602
or
Secondary Analyst
Tana M. Higman, +1-312-368-3122
Director
or
Committee Chairperson
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Managing Director
or
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