Moody's: Maiden Lane III Unwinding Shows AIG Progress in Reducing Government Support

The unwinding of Maiden Lane III, which had been created in 2008 to assume certain toxic assets held by American International Group, represents an ongoing reduction of government support for AIG, and reflects improving trends overall at the company, says Moody's Investors Service.

In its Weekly Credit Outlook, Moody's notes that the resent sale of remaining assets held in MLIII represents the end of the Federal Reserve Bank of New York's support to AIG. The only remaining government support for the company, says the ratings agency, is the U.S. Treasury's ownership of common stock.

Moody's says there has been growing investor appetite for AIG's debt and equity securities, and adds that the value of the MLIII assets was aided by a gradual recovery in the U.S. housing market and economy. 

As further positive signs for the insurer, Moody's pointed to the strong market presence and diversification of its core insurance operations, Chartis and SunAmerica. Moody's also says AIG has continued to monetize noncore holdings. The positive trends are offset by “relatively weak profitability of the core operations, the remaining exposure to certain noncore holdings with weaker credit profiles, and the complexity of risk management across numerous business lines and regions.”