NU Online News Service, April 2, 10:45 a.m. EDT

Standard & Poor's has upgraded American International Group's long-term counterparty credit rating and raised its stand-alone credit profile five notches to reflect the federal government's "extraordinary" financial support for the company.

At the same time, AIG announced that the Treasury Department had named two new directors to its board. Donald H. Layton and Ronald A. Rittenmeyer will serve on the AIG Board of Directors. The appointments are effective immediately.

Mr. Layton is former chief executive officer of E-Trade and Mr. Rittenmeyer is former CEO of Electronic Data Systems.

Treasury is doing so because, as S&P implied, the federal government controls approximately 79.9 percent of AIG's stock and because it has not paid dividends for four quarters on the preferred stock the government uses to control AIG.

As to S&P, the credit agency also said it was raising its stand-alone credit profile because the company is showing "continuing momentum" in reestablishing its multiline insurance market presence through its Chartis property and casualty and its SunAmerica life insurance operations.

S&P also said the changed ratings were appropriate in light of the good progress AIG is making in the unwinding of AIG Financial Products Corp., and the improved liquidity position of its noninsurance operations.

"In addition, we believe AIG's recently announced transactions reflect solid progress in its challenging restructuring plan," said S&P credit analyst credit analyst Kevin Ahern.

But S&P analysts said that while it is reaffirming AIG's overall and insurance subsidiary ratings, it maintains a negative outlook on the company.

The latter decision stems from S&P's view of the challenges AIG faces in sustaining operating performance that is more in line with the competitive profile of its insurance operations, as well as maintaining appropriate capitalization, specifically in its life insurance businesses, its analysts said.

The 'A+' financial strength ratings on Chartis and related property and casualty insurance companies "reflect our view of a strong global P/C franchise that is well diversified by geographic location and product line," Mr. Ahern said.

He added that in S&P's opinion, "The ongoing challenges of retaining customers and key employees while continuing to generate very profitable business somewhat offset the rating strengths."

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S&P Raises Some AIG Ratings, Treasury Names 2 Directors

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