Rating agencies awaited the fourth revision of the AIG plan

The announcement of American Insurance Group Inc's (AIG) US$62 billion loss for the fourth quarter of 2008 (US$99 billion for 2008) and revised restructuring plan from the US Treasury and Federal Reserve sparked various rating actions by Moody's Investors Service, Standard & Poor's and Fitch Ratings. It was reported that the rating agencies had been requested by the US Treasury and Federal Reserve to hold off on any rating actions until the revised restructuring plan had been announced.

Moody's affirmed its 'A3/P1' senior unsecured long and short term debt ratings assigned to AIG and its 'Aa3' insurance financial strength rating assigned to AIG's core property and casualty insurance operations. All ratings have a negative outlook. The ratings had been on review for possible downgrade since September 15, 2008.

Moody's said the affirmation of the ratings reflects the benefits of the restructuring steps announced as well as an expectation that the government will provide incremental support as needed to ensure that AIG can meet its obligations. The negative rating outlook signals the potential loss of customers, distributors and employees during the period of government intervention along with uncertainty over future ownership and capital structure.

S&P also removed the 'A-/A-1' long and short term credit ratings assigned to AIG and the 'A+' insurance financial strength rating assigned to insurance subsidiaries from CreditWatch with negative implications (from November 8, 2008) and affirmed the ratings with a negative outlook. Fitch affirmed the 'A/F1' long and short term issuer default ratings it assigns to AIG and the 'AA-'' insurer financial strength rating assigned to core insurance subsidiaries. The ratings have a stable outlook.

Both S&P and Fitch expressed a similar rationale to Moody's for their ratings. Both Moody's and Fitch lowered their ratings on AIG's subordinated and hybrid debt.
Fitch downgraded AEGON N.V., lowering its issuer default rating to 'A+' from 'AA' and lowered the insurer financial strength rating on its North American life insurance subsidiaries, including Monumental Life to 'AA' from 'AA+'. The outlook on the ratings is negative.

The rating actions follow AEGON's announcement that it expects to report a Q408 net loss of approximately €EUR1.2 billion and reflect Fitch's updated view of AEGON's exposure to the current volatility of credit and investment markets.
GPT Group has had its 'Baa2/P-2' long- and short- term credit ratings from Moody's placed on review for possible downgrade. Moody's is concerned about the group's constrained financial flexibility, including the risk of further tightening in covenant headroom.

Following on from Moody's the week before last, Fitch and S&P both moved on SLM Corp., again citing the potentially adverse impact of changes announced in the US budget to various Federal funding programs. Fitch placed its 'BBB/F3' long- and short- term issuer default ratings on Rating Watch Negative. Fitch noted that proposals, if passed, would result in SLM's managed loan portfolio becoming progressively more exposed to private education loans which are not government guaranteed.

S&P revised the outlook on the 'BBB-'' assigned to SLM Corp. to negative from stable, noting that the legislation has yet to pass Congress and is likely to be challenged along the way.

And following S&P from the week before last, Moody's placed Goodman Group's 'Baa1' senior unsecured rating and the 'Baa2' rating on its hybrid securities, on review for possible downgrade. The review will consider Goodman's weakened financial metrics and an expectation that they will not improve meaningfully in the near term, given severe market dislocation.

Moody's also placed the 'Baa1' insurance financial strength rating assigned to monoline insurer, Ambac Assurance Corporation, on review for possible downgrade again. The review was prompted by the deterioration in Ambac's qualified statutory capital position and the likelihood of increased expected and stress case loss estimates among the company's mortgage-related risk exposures.

The outcome of the review could result in a multi-notch downgrade and should be completed in the next few weeks.