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AIG's Senior Notes Get Stable Outlook from Moody's - Analyst Blog

American International Group, Inc. 's AIG 10-year senior notes worth $1.25 billion, 20-year senior notes worth $500 million and 30-year senior notes worth $750 million were recently assigned Baa1 ratings by Moody's Investors Service - a credit rating business of Moody's Corporation MCO .

Moody's has also assigned AIG's shelf registration the provisional ratings of Baa1 for senior unsecured debt and Baa2 for subordinated and junior subordinated debt. The outlook for the ratings remains stable.

The company expects to use net proceeds from the offering for general corporate purposes. This may comprise financing a portion of its debt tender offer, which currently remains pending.

The ratings indicate that the company is a leader in terms of global property casualty insurance along with U.S. life insurance and U.S. mortgage insurance. Moreover, AIG boasts a wide range of products with an expanded geographic reach, which have led to the current ratings. The ratings also reflect the company's focus on its core business and its healthy liquidity position.

However, offsetting these strengths are the company's weak profits and volatile reserves in property casualty insurance. Also, the company remains far more exposed to structured and alternative investments in property casualty as well as life insurance portfolios compared with its peers.

Additionally, AIG faces difficulties with regard to risk management across its several lines of business and diversified geographic reach. These factors are causes for concern for the insurer.

Rating affirmations from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining its creditworthiness in the market. AIG's ratings are likely to witness an upgrade if there is improvement in the credit profiles of operating units, particularly the U.S. property casualty insurance and life and retirement. Also, the runoff of the Direct Investment book and legacy Global Capital Markets portfolio along with improvement in the company's financial flexibility could lead to upward ratings revisions.

However, AIG's ratings could witness a downgrade it there is deterioration in the credit profiles of major operating units. Factors like insufficient liquidity and a decline in AIG's financial flexibility might lead to a ratings downgrade as well.

Currently, AIG carries a Zacks Rank #3 (Hold). Better-ranked stocks from the same sector include Assured Guaranty Ltd. AGO and ageas SA/NV AGESY . Both stocks sport a Zacks Rank #1 (Strong Buy).

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AMER INTL GRP (AIG): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report

ASSURED GUARNTY (AGO): Free Stock Analysis Report

AGEAS-ADR (AGESY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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