AIG Takes Ratings Hit From A.M.Best, S&P and Fitch

I think that American International Group, Inc. ( AIG) would be happy to have an AAA rating at the beginning of the day on September 15, 2008. Unfortunately this was an A an A and an A-.

AM Best reduced the ratings of the life/health  and property/casualty subsidiaries of American International Group (AIG) from A+(Superior) to A (Excellent). AIG's subsidiary American General Life Insurance Company, one of two structured settlement annuity issuers under the AIG umbrella has had an A or better A.M. Best rating for the last 50 years.

Fitch also announced a reduction in AIG's ratings from AA- to A. It is important to note however, that the Fitch reduction DOES NOT apply to to the structured settlement issuing companies American General Life Insurance Company, American International Life Assurance Company of New York, former New York structured settlement annuity issuing company Variable Annuity Life Insurance Company, American General structured settlement guarantor, AGC Life Insurance Company, or either of the  qualified assignment companies used when New York litigation is resolved with structured settlements funded by American International Assurance Company of New York, National Union Fire Insurance Company of Pittsburgh, PA, American Home Assurance Company

S&P announced a reduction to A- at about 830pm EDT.

Prior to the "1 notch reduction" announcements, which were made after the bell in the stock market's worst day since just after 9-11 , rumors were circulating of a drop of 1-3 notches.

CNBC reports that a Fed spokesman said that work on the AIG situation will continue through the night. It was reported that AIG is trying to raise $75B in capital.

How the ratings hit will affect AIG structured settlement annuity sales remains to be seen.  A single "A "(Excellent) from AM Best will affect the ability to attract certain tyoes of structured annuity business where a minimum A+ (Superior) or better is required by a judge, statute, or client guideline.  It is important however to point out that AIG is not the first company to be downgraded to A and may not be the last. Some, like Prudential Insurance Company of America, were downgraded and later regained their A+ rating. Others like Liberty Life and Symetra Life Insurance Company (downgraded under forner name SAFECO Life Insurance Company) have yet to regain their A+ rating.