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5 years ago
TEXT-Fitch: Government stock sale, deleveraging, rejuvenates AIG
September 13, 2012 / 5:06 PM / 5 years ago

TEXT-Fitch: Government stock sale, deleveraging, rejuvenates AIG

Sept. 13 - Fitch Ratings indicated this week that its financial ratings for American International Group, Inc.'s (AIG) no longer incorporate federal government support, as the U.S. Treasury Department reduced its stake in AIG's common stock to 15.9% from 53.0% through an announced sale of $18.0 billion in stock plus the exercise of a $2.7 billion overallotment. On Tuesday, we took several ratings actions on AIG to reflect the end of government ownership and reflect AIG's significant progress in restructuring and deleveraging over the past four years. These actions included an upgrade of AIG's issuer default rating to 'BBB+' from 'BBB' and an affirmation of insurer financial strength ratings of property/casualty and life insurance subsidiaries at 'A', and senior debt at 'BBB'. A complete list of AIG ratings can be found at www.fitchratings.com. The U.S. Treasury Department's latest stock sale was its largest of AIG shares and fifth overall, which combined have reduced government equity ownership from 92% at year-end 2010. AIG has eliminated all other government support provided to the firm through repayment of government entity-held debt and preferred stock obligations, sales of noncore subsidiaries, and assets held in the various special-purpose vehicles. AIG significantly reduced its overall financial leverage and financial market exposure through reduced reliance on debt by sharply decreasing the credit default swap contracts exposure of AIG Financial Products Corp. Future material improvements in leverage would most likely arise from the execution of an initial public offering or sale of AIG's aircraft leasing operation. We believe the insurer and its subsidiaries continue to demonstrate strong competitive positions in property/casualty and life insurance markets. A demonstrated ability to generate stronger and more consistent insurance segment profitability that simultaneously boosts debt servicing capabilities are key to future positive ratings movement. Conversely, future returns to higher leverage or a failure of recent operating initiatives to boost operating performance would enhance negative ratings pressure. With the government's transition to a minority shareholder, AIG will become regulated by the Federal Reserve as a result of its ownership of a bank. While this will likely add to compliance costs and efforts, we believe that AIG will be able to meet compliance and Federal Reserve capital requirements. Contact: Kellie Geressy-Nilsen Senior Director Fitch Wire +1 212 908-9123 Fitch, Inc. One State Street Plaza New York, NY 10004 James Auden Managing Director Corporate Finance, Insurance +1 312 368-3146 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.

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