S&P affirms AIG

Standard & Poor's said it affirmed its AA counterparty credit rating on American International Group Inc. and affirmed its AA+ counterparty credit and financial strength ratings on AIG's core operating subsidiaries.

The outlook remains negative.

The affirmation follows AIG's announcement of 2007 net income of $6.2 billion, down 56% from the prior year. The earnings included charges of $7.5 billion, after tax, for market valuation losses on AIG Financial Products super senior credit default swap portfolio and an additional $1.7 billion of other-than-temporary impairment charges on investments, largely related to U.S. residential mortgage-backed securities.

The agency said these charges clearly exceeded its expectations but not by a level that would change the ratings. AIG's capitalization to absorb these losses is still considered very strong, with $95.8 billion of shareholders' equity as of Dec. 31.

The negative outlook reflects the continued uncertainty around estimating economic losses and fair market values in the U.S. mortgage market. S&P believes that AIG will ultimately recover a meaningful portion of the 2007 unrealized market valuation loss, but the agency said the timing and the amount are difficult to estimate.

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