Moody’s Cuts AIG’s Debt Rating
Citing losses from its exposure to the U.S. mortgage market and credit derivatives, Moody's Investors Service cut American International Group's (AIG) debt rating.
Moody's, which had placed the world's largest insurers' rating on review for a possible downgrade after the insurer earlier this month unveiled a $7.8 billion first-quarter net loss, said the outlook on the rating was negative.
AIG's largest quarterly loss this month marks the firm's second consecutive quarter of record losses.
The downgrade came hours after AIG had announced it raised $20 billion with a sale of equity, debt and convertible securities. It places the insurer 3 notches below the top credit rating.
"Today's one-notch downgrade reflects AIG's sizable mortgage related losses and write-downs to date," the rating agency said, referring to market losses on credit default swaps (CDS) amounting to $13 billion and realised losses on residential mortgage-backed securities (RMBS) aggregating over $5 billion.
These losses, posted in the past two quarters, were in addition to the $9 billion write-down in investments.
The rating agency said the negative outlook reflected the company's exposure to further volatility in the U.S. mortgage market as well as uncertainty surrounding the strategic direction for AIG Financial Products, the unit holding the thorny credit derivatives.
Published on May 23, 2008
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