Fitch Places AIG’s Domestic Property/Casualty Subsidiaries’ Ratings on Rating Watch Negative

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has placed the 'A+' Insurer Financial Strength (IFS) ratings of American International Group Inc.'s (AIG) domestic property/casualty subsidiaries on Rating Watch Negative (see list of these subsidiaries at the end of this release). AIG's Issuer Default Rating (IDR), the ratings on the company's senior unsecured and hybrid securities, and ratings on AIG's other affiliated insurance and non-insurance companies are not affected by these actions.

Fitch's rating action follows today's disclosure by AIG of the company's fourth quarter 2009 results which included a $2.3 billion pre-tax ($1.5 billion after-tax) increase in reserves in its domestic property/casualty companies for prior accident years.

The actions reflect Fitch's concerns about AIG's reserve adequacy and underlying profitability, primarily on long-duration casualty business lines. Fitch views the magnitude of the adverse reserve development as somewhat of an outlier relative to the company's peers. The agency notes that while it considers AIG's reserve increase to be material from an operating perspective, it views it as much less material from a capital perspective.

Fitch plans to complete a review of AIG's full-year 2009 financial statements, including detailed statutory accounting basis loss reserve data and calendar year and accident year loss ratios by business line, as well as review actuarial reports on reserves. Fitch plans to complete this analysis within the context of a broader review of AIG's property/casualty operations. The agency anticipates completing this review in the next two-to-three months during which it plans to meet with AIG management.

If the results of the review provide Fitch with comfort regarding AIG's reserve adequacy and accident year underwriting profitability, the agency anticipates affirming AIG's existing ratings. Absent gaining such comfort, Fitch expects to downgrade the noted IFS ratings, most likely by one notch to 'A' from 'A+'.

Fitch has placed the following 'A+' IFS ratings on Rating Watch Negative:

--Chartis Property Casualty Company;

--American Home Assurance Company;

--Chartis Casualty Company;

--Commerce and Industry Insurance Company;

--Granite State Insurance Company;

--Illinois National Insurance Co.;

--National Union Fire Insurance Company of Pittsburgh, PA;

--New Hampshire Insurance Company;

--The Insurance Company of the State of Pennsylvania;

--Chartis Select Insurance Company;

--Landmark Insurance Company;

--Lexington Insurance Company;

--AIU Insurance Company;

--Chartis Specialty Insurance Company;

--Chartis MEMSA Insurance Company;

--Chartis UK Ltd.;

--Chartis Overseas, Limited.

These rating actions reflect the application of Fitch's current criteria which is available on Fitch's web site at 'www.fitchratings.com' and specifically include:

--'Insurance Rating Methodology', dated Dec. 29, 2009;

--'Non-Life Insurance Rating Criteria (Global)' dated March 2, 2007.

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings, Chicago
Mark E. Rouck, CPA, CFA, +1-312-368-2085
Julie A. Burke, CPA, CFA, +1-312-368-3158
Brian Bertsch, +1-212-908-0549 (Media Relations, New York)
[email protected]

Source: Fitch Ratings