Fitch Expects to Rate AIG's New Sr. Unsecured Notes 'BBB+(Exp)'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings expects to assign a rating of 'BBB+' to American International Group, Inc.'s (AIG) EUR750 million issuance of 1.5% senior notes due June 8, 2023. Proceeds from this new issue will be used for general corporate purposes.

KEY RATING DRIVERS

This new issue is rated equivalent to the ratings of AIG's existing senior debt. Financial leverage as measured by the ratio of financial debt and preferred securities to total capital (excluding operating debt and the impact of FAS 115) was approximately 20% at March 31, 2016, up from approximately 18% at year-end 2015. This issuance will move pro forma financial leverage to within management's target leverage ratio of 20% - 25%.

Fitch affirmed AIG's and its insurance operating subsidiaries ratings on March 9, 2016. The Rating Outlook is Stable. The Rating Action Commentary is available on www.fitchratings.com.

RATING SENSITIVITIES

Key triggers that could lead to an upgrade include:

--Successful completion of pending strategic actions and greater certainty that the corporate and operating structure is in place for the longer term, and further meaningful restructuring actions are unlikely;

--A shift to sustainable property/casualty segment underwriting profitability, with demonstration of greater loss reserve stability or reserve redundancies;

--Improvement in GAAP earnings to a level consistent with interest coverage at 10x or above;

--While achieving the above, maintenance of financial leverage and risk-based capital at the company's insurance subsidiaries remaining within newly revised targeted levels.

Key triggers that could lead to a downgrade include:

--Increase in financial leverage to above 25%, or an increase in the TFC ratio to above 0.7x from 0.5x currently;

--Significant reductions in debt servicing capacity from holding company assets and available dividends from subsidiaries to a level below 4.5x annual interest on financial debt;

--Large underwriting losses and/or further material reserve volatility of the company's non-life insurance subsidiaries;

--Sharp deterioration in the company's domestic life subsidiaries' profitability trends;

--Material declines in risk-based capital ratios at either the domestic life insurance or the non-life insurance subsidiaries.

FULL LIST OF RATING ACTIONS

Fitch expects to assign:

American International Group, Inc.

--EUR750 million 1.5% senior unsecured notes due June 8, 2023 'BBB+(Exp)'.

Fitch currently rates AIG and its subsidiaries as follows:

American International Group, Inc.

--Long-Term Issuer Default Rating (IDR) 'A-';

--Various senior unsecured note issues 'BBB+';

--EUR42.24 million of 6.797% senior unsecured notes due Nov. 15, 2017 'BBB+';

--GBP100.2 million of 6.765% senior unsecured notes due Nov. 15, 2017 'BBB+';

--USD1 billion of 2.3% senior unsecured notes due July 16, 2019 'BBB+';

--USD638.4 million of 3.375% senior unsecured notes due Aug. 15, 2020 'BBB+';

--USD708 million of 6.4% senior unsecured notes due Dec. 15, 2020 'BBB+';

--USD1.5 billion of 3.3% senior unsecured notes due Mar. 1, 2021 'BBB+';

--USD1.5 billion of 4.875% senior unsecured notes due June 1, 2022 'BBB+';

--USD1 billion of 4.125% senior unsecured notes due Feb. 15, 2024 'BBB+';

--USD1.25 billion of 3.75% senior unsecured notes due July 10, 2025 'BBB+';

--USD1.5 billion 3.9% senior unsecured notes due April 1, 2026 'BBB+';

--USD1.2 billion of 3.875% senior unsecured notes due Jan. 15, 2035 'BBB+';

--USD500 million of 4.7% senior unsecured notes due July 10, 2035 'BBB+';

--USD1 billion of 6.25% senior unsecured notes due May 1, 2036 'BBB+';

--USD243.43 million of 6.820% senior unsecured notes due Nov. 15, 2037 'BBB+';

--USD 2.25 billion of 4.5% senior unsecured notes due July 16, 2044 'BBB+';

--USD350 million of 4.35% senior unsecured notes due March 20, 2045 'BBB+';

--USD750 million of 4.8% senior unsecured notes due July 10, 2045 'BBB+';

--USD290 million of 4.9% senior unsecured notes due July 17, 2045 'BBB+';

--USD800 million of 4.375% senior unsecured notes due Jan. 15, 2055 'BBB+';

--USD20.3 million of 5.60% senior unsecured notes due July 31, 2097 'BBB+';

--EUR12.85 million of 8.00% series A-7 junior subordinated debentures due May 22, 2038 'BBB-';

--USD607.17 million of 8.175% series A-6 junior subordinated debentures due May 15, 2058 'BBB-';

--GBP88.2 million of 5.75% series A-2 junior subordinated debentures due March 15, 2067 'BBB-';

--EUR162.6 million of 4.875% series A-3 junior subordinated debentures due March 15, 2067 'BBB-';

--GBP5.6 million of 8.625% series A-8 junior subordinated debentures due May 22, 2068 'BBB-';

--USD403.18 million of 6.25% series A-1 junior subordinated debentures due March 15, 2087 'BBB-'.

AIG International, Inc.

--Long-Term IDR 'A-'.

AIG Life Holdings, Inc.

--Long-Term IDR at 'A-';

--USD135.5 million of 7.50% senior unsecured notes due July 15, 2025 'BBB+';

--USD150 million of 6.625% senior unsecured notes due Feb. 15, 2029 'BBB+';

--USD116.4 million of 8.50% junior subordinated debentures due July 1, 2030 'BBB-';

--USD78.9 million of 7.57% junior subordinated debentures due Dec. 1, 2045 'BBB-';

--USD227.3 million of 8.125% junior subordinated debentures due March 15, 2046 'BBB-'.

AGC Life Insurance Company

American General Life Insurance Company

The Variable Annuity Life Insurance Company

United States Life Insurance Company in the City of New York

--IFS rating 'A+'.

AIU Insurance Company

American Home Assurance Company

AIG Assurance Company

AIG Europe Limited

American International Overseas Limited

AIG Property Casualty Company

AIG Specialty Insurance Company

Commerce & Industry Insurance Company

Granite State Insurance Company

Illinois National Insurance Company

Insurance Company of the State of Pennsylvania

Lexington Insurance Company

National Union Fire Insurance Company of Pittsburgh, PA

New Hampshire Insurance Company

--IFS rating 'A'.

ASIF Global Financing

--USD750 million of 6.9% senior secured notes due March 15, 2032 'A+'.

ASIF II

--GBP200 million of 6.375% senior secured notes due Oct. 5, 2020 'A+';

--USD82 million of 0% senior secured notes due Jan. 2, 2032 'A+'.

ASIF III Program

--GBP350 million of 5.375% senior secured notes due Oct. 14, 2016 'A+';

--GBP250 million of 5% senior secured notes due Dec. 18, 2018 'A+';

--EUR200 million of 1.66% senior secured notes due Dec. 20, 2024 'A+'.

The Rating Outlook is Stable.

Date of Relevant Rating Committee: March 8, 2016

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology ￢ﾀﾔ Effective Sept. 16, 2015 to May 17, 2016 (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005411

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160601006591/en/

Fitch Ratings
Primary Analyst
James B. Auden, CFA
Managing Director
+1-312-368-3146
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Tana M. Higman
Director
+1-312-368-3122
or
Committee Chairperson
Keith M. Buckley
Managing Director
+1-312-368-3211
or
Media Relations:
Hannah James, +1 646-582-4947
[email protected]

Source: Fitch Ratings

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