AIG - Rating Agencies

  • 2008 0912 - FRB - Federal Reserve Bank of New York Meeting with AIG Notes - Mosser - FCIC-AIG0021217 - 2p
    • Ratings Downgrades Triggers
  • 2009 09 - GAO - Troubled Asset Relief Program: Status of Government Assistance Provided to AIG - 101p
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  • 2008 0528
  • news.ambest.com/presscontent.aspx?altsrc=1&refnum=12858
  • claimsjournal.com/news/national/2008/05/29/90423.htm
    • Best added that the holding company downgrade reflects its “viewpoint of the detrimental implications of AIG’s risk management and aggressive risk appetite relating to investment concentrations within the securities lending portfolio and matched investment programs tied to mortgage related securities.”

      The article added that AIG’s “risk appetite” had been larger than Best’s expectations, “regardless of AIG’s market surveillance resources within the mortgage industry.” Best also noted that its concerns “included potential liquidity issues within the securities lending program, lack of proactive management or containment of exposure to the mortgage and real estate industry on both the liability and asset sides of AIG’s balance sheet, and over reliance on the amount of support provided by the company’s strong balance sheet.

  • Fitch
  • Moody's
  • Standard and Poors

  • FCIC - Moodys Follow Up Exhibits - Rating Committee Memos for AIG.pdf - 784p
  • 2008 0915 - WSJ - S&P Downgrades AIG, Citing ‘Reduced Flexibility’- [link]
    • All of these ratings remain on CreditWatch with negative implications, where they were placed on Sept. 12, 2008.

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

“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.

2010 0526 - COP - 2010 0526 - COP - TARP and Other Government Assistance for AIG - [PDF-241p

Rodney Clark (Managing Director, Ratings Services, Standard & Poor's) - Testimony - 10p

  • On March 30, 2005 S&P downgraded AIG’s rating from ‘AAA’ to ‘AA+’ because of its concern over AIG’s internal controls, especially regarding its financial transactions.
  • S&P again lowered the rating to ‘AA’ in June 2005 based on AIG’s significant accounting adjustments.
  • In February 2008, S&P placed a negative outlook on AIG’s credit rating because of concerns as to how AIG valued it CDS portfolio.
  • The credit rating was again downgraded in May 2008 to ‘AA-’ based in large part on the $5.9 billion loss on its CDS portfolio.
  • As the crisis in the financial markets escalated in September 2008, S&P became more concerned with AIG’s financial condition.
  • The final nail in the coffin occurred on September 15, 2008 when S&P lowered AIG’s rating to ‘A-.’

<Bonk:> - 2010 0526 - COP - Rodney Clark (Managing Director, Ratings Services, Standard & Poor's) - 10p

Standard and Poors

  • 2005 0330 - AAA to AA+
  • 2005 06 - AA+ to AA

  • 2008 02 - Negative Outlook
  • 2008 05 - AA to AA- 
  • 2008 0912 - All of these ratings remain on CreditWatch with negative implications, where they were placed on Sept. 12, 2008.
    • 2008 0915 - WSJ - S&P Downgrades AIG, Citing ‘Reduced Flexibility’- [link]
  • 2008 0915 - AA- to A- 
  • 2008 0915 - WSJ - S&P Downgrades AIG, Citing ‘Reduced Flexibility’- [link]

2010 0610 - COP - The AIG Rescue, Its Impact on Markets, and the Government’s Exit Strategy - 337p

  • (p15) - In the spring of 2005, rating agency Standard & Poor’s (S&P) lowered the long-term senior debt and counterparty ratings of AIG from ‘AAA’ to ‘AA.’ As discussed in Section B3, this proved disastrous for AIGFP.6
  • (p20) - 30 AIGFP was viewed favorably by AIG investors and the ratings agencies. From their vantage point, AIGFP was a risk management tool for AIG’s core insurance business because it diversified the company’s earnings base. ‘‘The establishment of a separate entity by an insurance company to offer financial products could satisfy one or more of the following benefits: the creation of capital efficiencies, isolation of the risk related to a specific business line for risk-management purposes, and the creation of a noninsurance entity that is not encumbered by possible regulatory restrictions.’’ Standard & Poor’s Ratings Services, Rating Financial Product Companies Higher Than Related Insurance Companies (Apr. 29, 2004) (online at www.standardandpoors.com/prot/ratings/articles/en/us/?assetID=1245173065318) <Bad LINK>
  • 2008 0814 - FCIC - 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.