Fitch downgrades AIG

Fitch Ratings said it downgraded American International Group, Inc.'s long-term issuer default rating and senior debt to BBB from A and its series A junior subordinated debentures and series B debentures to B from BB. The short-term issuer default rating was affirmed at F1.

The long-term issuer default and senior debt ratings of AIG International, Inc. and AIG Life Holdings (US), Inc. were downgraded to BBB from A, and the preferred stock and capital securities of AGFC Capital Trust I, American General Capital II, American General Institutional Capital A and American General Institutional Capital B were lowered to B from BB.

The outlook is negative for AIG Life and evolving for the remaining companies.

The agency said downgrade is based on a perceived decline in the property/casualty subsidiaries' competitive positioning derived from the organization's financial difficulties along with the effect this stress is likely to have on AIG's near-to-mid-term operating results.

While Fitch believes that AIG has taken reasonable steps to protect its competitive positioning and franchise value in light of these difficulties, the agency said it views the necessity of such measures as symptomatic of the deterioration of the franchise.

The agency believes U.S. government support of AIG currently remains strong. However, Fitch said it also believes that once systemic risks abate, the U.S. government will likely not provide additional funding, if needed, simply to support ratings at the former levels.

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