American International Group Inc. Perpetual Preferred Shares Series A Rated 'BBB-'
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NEW YORK (S&P Global Ratings) March 6, 2019--S&P Global Ratings said today
that it has assigned its 'BBB-' debt rating to American International Group
Inc.'s (NYSE:AIG) proposed issuance of fixed-rate noncumulative perpetual
preferred shares, Series A. This preferred share rating is two notches below
our 'BBB+' long-term issuer credit rating on AIG. The two-notch differential
represents the subordination of the issue and the optional dividend
deferability of the preferred shares.
We expect the company to use the proceeds from these shares for general
corporate purposes, which may include the retirement of its $1 billion debt
that matures in July 2019.
We view these Series A preferred shares as having intermediate equity content
for the purpose of our capital-adequacy calculations. Other than a rating
agency or regulatory capital event, AIG has the option of redeeming these
preferred shares on or after March 15, 2024. The regulatory capital event is
triggered if there are developments in any regulatory group capital standard
that would disqualify eligibility of capital treatment, such as National
Association of Insurance Commissioners group capital standards or capital
rules proposed by the International Association of Insurance Supervisors.
Likewise, at a minimum, capital instruments need to qualify as "eligible"
regulatory capital for us to consider inclusion in our total adjusted capital
measure. The regulatory capital event does not include a solvency ratio
trigger.
Although hybrids are currently a modest contributor to AIG's capital
structure, our intermediate equity content classification is an important
distinction in light of the company's rising financial leverage (to 29% as of
year-end 2018 and 2017 from 24% as of Dec. 31, 2016) and its recently
announced $2 billion board-authorized share-repurchasing program. We expect
financial leverage to remain below 30% in 2019. We believe management is
committed to maintaining 'AA' capital adequacy according to our model. AIG has
also made limited progress toward turning around its operating fundamentals.
