S&P affirms all AIG ratings

Standard & Poor's affirmed its ratings on American International Group Inc., its insurance operations and related subsidiaries. The outlook is stable. S&P said the ratings are based on AIG's extremely well-diversified business position, which is positioned to strengthen further in light of constricting property/casualty capacity, a track record of excellent operating performance that should improve further given significant property/casualty rate improvements and extremely strong capitalization. These factors are partially offset by financial leverage temporarily exceeding that of the rating level. The increased financial leverage resulted largely from AIG's acquisition of American General Corp., which closed in the third-quarter of 2001, and is expected to be reduced over the short term, S&P said.

S&P said it expects AIG's financial leverage will decrease, with the goal that debt leverage will fall to 15% or less from 16.8% as of Sept. 30. The combined ratio for the property/casualty operations is expected to be in the 95%-97% range in 2001 and over the following two years. The consolidated ROR will be in the sustainable 16%-18% range, though 2002 could be higher. S&P also anticipates that AIG will continue to be an active consolidator in the mergers and acquisitions market, particularly in areas in which AIG can expand distribution. AIG's mix of business will be more heavily skewed toward domestic life product lines (impact of American General) but expansion (optimizing on market conditions both by product and geographic location) in the property/casualty sector is expected. Growth in business volume will likely stress capital adequacy in the short term, but strong operational earnings are expected to restore capital strength.

S&P rates Goldman's HCA Exchangeables A+

Standard & Poor's assigned an A+ rating to Goldman Sachs Group Inc.'s $11.76 million of 3.5% medium-term notes exchangeable for the common stock of HCA Inc.

S&P rates new Continental convertible B

Standard & Poor's assigned a B rating to Continental Airlines Inc.'s new $175 million of 4.5% convertible notes due 2007. The rating is on CreditWatch with negative implications.

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