Standard & Poor's Ratings Services has affirmed American International Group's financial ratings, saying the insurer's ability to raise money to replace capital lost in the previous two quarters exceeded expectations.
The group's "AA-minus/A-1-plus" counterparty credit and senior debt ratings were affirmed and S&P removed those ratings from CreditWatch negative.
Meanwhile, AIG was hit with a lawsuit from a Florida pension fund, which accused the insurer of issuing "a series of false and misleading statements relating to the company's finances that artificially inflated the price of AIG securities."
S&P said it has also affirmed the "AA-plus/A-1-plus" counterparty credit and financial strength ratings on AIG's core operating subsidiaries, and the "A-plus/A-1″ counterparty credit rating on International Lease Finance Corp. (ILFC), AIG's aircraft leasing branch.
"These actions follow the settlement of most of AIG's recently announced capital plan," said Rodney Clark, Standard & Poor's credit analyst, in a statement.
AIG announced today it had completed raising $20 billion through the issuance of new common shares, equity units and junior subordinated debentures.
S&P noted that AIG had lost capital in back-to-back quarters "due to market valuation losses and other-than-temporary impairments on mortgage-related securities."
Mr. Clark said, "We continue to believe that a meaningful portion of the market valuation losses are overstated due to volatile and illiquid conditions, and that some recovery is likely to occur." He added, "However, due to uncertainty as to the timing and magnitude of recoveries, it was appropriate for AIG to raise capital at this time."
The outlook on all of the companies is negative. S&P said the outlook reflects continued uncertainty in the investment markets. The rating agency added that it "expects that AIG's earnings for the year will improve from first-quarter levels, but will still fall short of those in 2007."
S&P also said that further deterioration in the mortgage markets could result in future downgrades for AIG, and that significant recoveries of asset values could revise the outlook to stable. A stable outlook, though, will not likely occur for at least two quarters, S&P said.
The prospective class-action lawsuit was filed in U.S. District Court in Manhattan by the law firm Bernstein Litowitz Berger and Grossman on behalf of the Jacksonville, Fla. Police and Fire Pension Fund and "all others similarly situated." It names AIG and several officers and directors as defendants.
The complaint claims that AIG had falsely assured investors that it was sufficiently insulated from the turmoil in the credit markets.
"In truth, AIG hid or recklessly ignored facts regarding the mounting losses on the company's assets and insurance products tied to the residential mortgage market, even as its top management continued to claim that AIG's actual exposure was 'close to zero,'" it was charged.
As a result, the complaint says, tens of billions of dollars in shareholder value was wiped out "causing substantial damage to the class."
An AIG spokesman declined to comment on the lawsuit, citing company policy.
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