AIG - Rating Agencies

  • 2009 09 - GAO - Troubled Asset Relief Program: Status of Government Assistance Provided to AIG - 101p

2008 0628 - Bloomberg News - AIG to Absorb US $5B Losses on Securities Lending: Insurance Units Wrote Down $13B Tied To Mortgages - 28 June 2008) - Martin Weiss - <WishList>

“American International Group Inc plans to absorb losses for a dozen insurance units after their securities lending accounts suffered $13 billion of write downs tied to the subprime mortgage collapse during the past year.

  • The world’s largest insurer will absorb as much as US$5 billion of any losses on sales of investments, up from a previous commitment of US $500 million, said Christopher Swift, vice-president for life and retirement services.
  • AIG will also inject an undisclosed amount of capital into some of the subsidiaries, he said.

⊗ Moody’s Investors Services and AM Best Co. both cited the write downs in May when they downgraded New York based AIG’s credit ratings.

State regulators in Texas said they didn’t know AIG was investing cash collateral from the securities lending business in subprime-linked assets and were concerned the insurance units hadn’t put aside enough capital to cover potential losses.

  • 2008 0814 - FRB (Kevin Coffey/NY/FRS) - FCIC-AIG0021211 - 3p
    • Recent Rating Agency Statements
      • The team had not yet had an opportunity to review the Moodys or the S&P statements on AIG so they had not yet factored this into their analysis (or earlier comments on liquidity and capital).
      • However, they seemed to focus particular attention when we mentioned the S&P statement regarding AIG's need to achieve earnings stability in the third quarter.
      • As they noted a quite a few times, this gave AIG only 45 days.

Wikipedia

  •  Financial Crisis Inquiry Report (PDF). GPO. 2011. p. 119. 
    • Credit ratings also determined whether investors could buy certain investments at all.
    • The SEC restricts money market funds to purchasing “securities that have received credit ratings from any two NRSROs ... in one of the two highest short-term rating categories or comparable unrated securities.”
    • The Department of Labor restricts pension fund investments to securities rated A or higher.
    • Credit ratings affect even private transactions: contracts may contain triggers that require the posting of collateral or immediate repayment, should a security or entity be downgraded.
    • Triggers played an important role in the financial crisis and helped cripple AIG.