AIG - Rating Agencies

  • re: 2005
  • Even as Frost spoke, trouble was brewing for AIG.
  • On March 14, 2005, its legendary chairman and chief executive, Maurice “Hank” Greenberg, stepped down amid allegations about his involvement in a questionable deal and accounting practices at AIG.
    • The next day, Fitch Ratings downgraded AIG’s credit rating to AA for the first time in Financial Products’ 18 years.
    • The two other major rating services, Moody’s and Standard & Poor’s, soon followed suit.
  • The fallout came swiftly, as AIG’s next quarterly report to federal regulators disclosed.
    • The downgrades had triggered provisions requiring Financial Products’ parent company to post $1.16 billion in collateral with their counterparties, their partners in the swaps.

2009 0102 - Los Angeles Times - Credit rating woes sent AIG spiraling - [link]

  • 2008 0628 - Bloomberg News - AIG to Absorb US $5B Losses on Securities Lending: Insurance Units Wrote Down $13B Tied To Mortgages, by Miles Weiss - <WishList>
    • https://jessescrossroadscafe.blogspot.com/2008/06/off-balance-sheet-antics-hit-insurance.html 
    • “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.
  • 2008 0814 - 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.