A.M. Best Comments on the Acquisition of American International Group, Inc.'s Personal Lines Companies by Farmers Group, Inc.

OLDWICK, N.J. -- A.M. Best Co. has commented that the financial strength rating of A (Excellent), issuer credit ratings of "a" and negative outlook of the personal lines companies owned by American International Group, Inc. (AIG) (New York, NY) are unchanged following the announcement of the sale of these AIG companies to Farmers Group, Inc. (Farmers) (Los Angeles, CA), a subsidiary of Zurich Financial Services (Zurich) (Zurich, Switzerland). (See below for a detailed listing of the AIG companies.)

AIG and Farmers have announced that the sale price is $1.9 billion; $1.5 billion will be paid in cash and the balance will be paid via issuance to AIG of $400 million in euro-denominated subordinated capital notes backed by Zurich's principal operating unit, Zurich Insurance Company (Zurich, Switzerland). These AIG companies' are direct subsidiaries of AIG's commercial insurance entities, and it is A.M. Best's expectation that the capital position of these commercial operating companies will be maintained post transaction.

While no revision is expected to the ratings of the AIG personal lines companies as a result of this transaction, it is likely that the outlook on the ratings will be revised to "stable" from "negative," reflecting the current outlook of the ratings of Farmers.

A.M. Best believes the transaction will have a positive impact on the remaining AIG commercial property/casualty entities, but notes that the failure of the sale could result in a re-evaluation on the ratings of the personal lines companies of AIG due to the deterioration in their perceived franchise value.

The following personal lines companies of American International Group, Inc. are being sold to Farmers Group, Inc.:

* 21st Century Insurance Group

* 21st Century Casualty Company

* 21st Century Insurance Company

* 21st Century Insurance Company of the Southwest

* New Hampshire Indemnity Company, Inc.

* American International Pacific Insurance Company

* AIG Hawaii Insurance Company, Inc.

* AIG National Insurance Company, Inc.

* American Pacific Insurance Company, Inc.

* American International Insurance Company

* American International Insurance Company of California

* American International Insurance Company of New Jersey

* AIG Advantage Insurance Company

* American International Insurance Company of Delaware

* AIG Centennial Insurance Company

* AIG Auto Insurance Company of New Jersey

* AIG Preferred Insurance Company

* AIG Premier Insurance Company

* AIG Indemnity Insurance Company

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.