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Best, Fitch downgrade AIG ratings


NEW YORK—A.M. Best Co. Inc. and Fitch Ratings late Monday both downgraded their ratings on American International Group Inc. and its subsidiaries.

Oldwick, N.J.-based A.M. Best dropped AIG's issuer credit rating to bbb from a+. Fitch, meanwhile, downgraded AIG's issuer default rating and outstanding debt ratings, including revising its long-term issuer default rating to A from AA-.

Both agencies also revised their financial strength ratings on AIG's subsidiaries.Best downgraded to A from A+ its financial strength ratings of AIG's domestic property/casualty subsidiaries.

Furthermore, it downgraded AIG-owned Transatlantic Holdings Inc.'s debt ratings to A from A+, among other changes. The ratings were also placed under review, Best said.

Fitch downgraded to AA- from AA+ the insurer financial strength of various AIG subsidiaries.

Best said all of its AIG ratings have been placed under review with negative implications, while Fitch said all ratings remain on watch negative.

In a statement, Oldwick, N.J.-based Best said its moves "are based on the rapid deterioration of the already existing fragile condition of AIG's financial strength and flexibility. Specifically, AIG's lack of liquidity at the holding company level and management's need to secure funding options are not representative of financial stability and not reflective of AIG's current ratings."Best said also it will need to review a plan approved Monday by New York officials to shift about $20 billion in assets from AIG's insurance operations to its holding company, to determine that step's impact on the specific subsidiaries.

Commenting on the drop to a bbb on AIG's issuer credit rating, John Wicher of Wicher & Associates in San Francisco, said "it's obviously a very dramatic drop" and reflects "the uncertainty people feel in this marketplace. It's quite remarkable."New York-based Fitch said its changes reflect the ratings agency's view "that AIG's financial flexibility and ability to raise holding company cash is extremely limited due to recent declines in the company's stock price, widening credit spreads, and difficult capital market conditions."

Fitch "believes that AIG is likely to pursue other steps to raise cash and capital and that the company may pursue the sale of various operating units." It adds in its statement, however, that "these measures will take time to develop and thus while they are likely to provide AIG with long-term benefits, they are unlikely to provide benefits in the short-term. Notwithstanding Fitch believes the accommodations being provided by AIG's insurance regulators has eased the potential liquidity strain being experienced at the holding company level."