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Fitch Affirms AIG's Sr Debt at 'AAA'; Removes from RW; Outlook Negative.

Business Editors

CHICAGO--(BUSINESS WIRE)--May 19, 2003

Fitch Ratings has affirmed the senior debt and long-term issuer rating of American International Group, Inc. (AIG) at 'AAA' and removed the ratings from Rating Watch Negative. Other long-term fixed income security ratings, as well as the company's short-term and commercial paper ratings, were also affirmed, and are listed below. Approximately $5 billion of securities were affected. The Rating Outlook is Negative.

The insurer financial strength (IFS) ratings of AIG's insurance company subsidiaries have also been affirmed. The Rating Outlook for the IFS ratings is Stable.

AIG's holding company debt ratings were placed on Rating Watch Negative on February 3, 2003, following the company's announcement of after-tax reserve increase of $1.8 billion in its U.S. commercial property/casualty operations.

At the time, Fitch said that it would take a 'fresh look' at its ratings on AIG's debt since the charge fell outside expectations. The goal of the review was to re-evaluate the risk profile of AIG relative to 'AAA' standards given generally negative trends in the financial services industries, especially the U.S. commercial lines property/casualty business, and the potential dilution of consolidated credit quality from growth in lower credit quality businesses. Over the past three months, Fitch has held numerous meetings with AIG management across its core business units. Fitch has also reviewed significant amounts of both public and non-public information.

The affirmation of AIG's ratings reflects Fitch's view that AIG remains among the very best managed companies in the world, and that its system of controls and risk evaluation are second to none. Fitch is confident that AIG fully understands the risks that it is taking on, that risks are assumed in a highly strategic manner and that risk management is well coordinated among business units. Risks are also extremely well diversified, and Fitch did not detect any undue concentrations of risks.

Fitch also recognizes the company's pre-eminent global insurance organization, with excellent worldwide brands and franchises, and excellent operating results. In addition, the organization has exhibited strong underwriting skills and adept ceded reinsurance management.

Fitch also views very favorably the diversified nature of the organization's products, distribution systems and geographic reach. This diversification, which is unequaled in the insurance industry and among the strongest in the broader financial services industry, has contributed to AIG's ability to generate stable and predictable historical operating results, as well as develop a broad and deep management team.

The Negative Rating Outlook on AIG's holding company debt ratings reflects Fitch's view that while risks are very well managed, Fitch believes that AIG is leveraging risks against its capital base to levels that fall somewhat outside of 'AAA' standards. This is based in part on review of both traditional leverage ratios and risk-based capital ratios, but also heavily on Fitch's subjective analyses. Fitch recognizes that the nature of many of AIG's risks exposures is not adequately captured by existing quantitative capital ratio analysis techniques.

Fitch also believes that earnings volatility at AIG may be higher in the future than in the past given Fitch's cautious views on the outlook for the businesses in which AIG is engaged. That said, Fitch believes that AIG's earnings held up extremely well in recent periods during what has been an exceptionally difficult operating and economic environment.

Fitch notes that earnings levels in both 2001, due to the 9/11 losses and acquisition-related charges, and 2002, as a result of noted reserve increase and investment losses, were at their lowest levels in several years. Fitch believes, however, that AIG's earnings will be more stable than those of almost all other companies given their highly diversified nature.

Fitch's concerns related to AIG's balance sheet characteristics relative to 'AAA' standards and potential for increased future earnings volatility, when judged against its high earnings power, franchise value and diversity, will heavily influence AIG's future ratings levels.

Rating Actions:

American International Group, Inc.

-- Long-term rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook;

-- Senior debt rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook;

-- Short-term rating of 'F1+' affirmed;

-- Commercial paper rating of 'F1+' affirmed.

American General Corporation

-- Senior debt rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook.

American General Capital I, II, III

-- Preferred securities rating affirmed 'AA+'; removed from Rating Watch - Negative. Negative Rating Outlook.

American General Institutional Capital A, B

-- Capital securities rating affirmed 'AA+'; removed from Rating Watch - Negative. Negative Rating Outlook.

AIG International Inc.

-- Long-term rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook;

-- Senior debt rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook;

-- Short-term rating of 'F1+' affirmed;

-- Commercial paper rating of 'F1+' affirmed.

HSB Capital Trust I

-- Preferred securities rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook.

Western National Corporation

-- Senior debt rating affirmed 'AAA'; removed from Rating Watch - Negative. Negative Rating Outlook.

The following insurer financial strength ratings have been affirmed with a Stable Rating Outlook:

AIG Hawaii Insurance Company Inc.

-- Insurer financial strength rating affirmed 'AAA'.

AIG Annuity Insurance Company

-- Insurer financial strength rating affirmed 'AA+'.

AIG Life Insurance Company

-- Insurer financial strength rating affirmed 'AAA'.

AIG SunAmerica Life Assurance Co.

-- Insurer financial strength rating affirmed 'AAA'.

AIU Insurance Co.

-- Insurer financial strength rating affirmed 'AAA'.

American General Life and Accident Insurance Co.

-- Insurer financial strength rating affirmed 'AA+';

American General Life Insurance Company

-- Insurer financial strength rating affirmed 'AA+';

American Home Assurance Co.

-- Insurer financial strength rating affirmed 'AAA';

American International Assurance Co. Ltd.

-- Insurer financial strength rating affirmed 'AAA';

American International Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

American International Insurance Co. of California

-- Insurer financial strength rating affirmed 'AAA';

American International Insurance Co. of New Jersey

-- Insurer financial strength rating affirmed 'AAA';

American International Life Assurance Co. of NY

-- Insurer financial strength rating affirmed 'AAA';

American International Specialty Lines Ins. Co.

-- Insurer financial strength rating affirmed 'AAA;

American International Underwriters Overseas Ltd.

-- Insurer financial strength rating affirmed 'AAA';

American Life Insurance Company

-- Insurer financial strength rating affirmed 'AAA';

Birmingham Fire Insurance Company of PA

-- Insurer financial strength rating affirmed 'AAA';

Commerce & Industry Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

Ezer Mortgage Insurance Co. Ltd

-- Insurer financial strength rating affirmed 'AAA';

Hartford Steam Boiler Inspection & Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

Insurance Company of the State of PA

-- Insurer financial strength rating affirmed 'AAA';

Landmark Insurance Co. Ltd

-- Insurer financial strength rating affirmed 'AAA';

Lexington Insurance Company

-- Insurer financial strength rating affirmed 'AAA';

Minnesota Insurance Company

-- Insurer financial strength rating affirmed 'AAA';

National Union Fire Insurance Co. of Pittsburgh

-- Insurer financial strength rating affirmed 'AAA';

New Hampshire Indemnity Company

-- Insurer financial strength rating affirmed 'AAA';

New Hampshire Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

SunAmerica Life Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

The United States Life Ins. Co in the City of NY

-- Insurer financial strength rating affirmed 'AA+';

The Variable Annuity Life Insurance Company

-- Insurer financial strength rating affirmed 'AA+';

United Guaranty Residential Insurance Co.

-- Insurer financial strength rating affirmed 'AAA';

The following insurer financial strength ratings have been withdrawn:

All American Life Insurance Company

-- Insurer financial strength rating of 'AA+' withdrawn;

American General Life Insurance Company of New York

-- Insurer financial strength rating of 'AA+' withdrawn;

The American Franklin Life Insurance Company

-- Insurer financial strength rating of 'AA+' withdrawn;

The Franklin Life Insurance Company

-- Insurer financial strength rating of 'AA+' withdrawn;

The Old Line Life Insurance Company of America

-- Insurer financial strength rating of 'AA+' withdrawn.
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Publication:Business Wire
Date:May 19, 2003
Words:1250
Previous Article:Fitch Rts Las Vegas, NV $3.6MM & $3.4MM Rfdg LTGOs 'AA'.
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