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Fitch Drops Positive Watch on AIG Unit

Posted on 03 Jun 2010

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Fitch Ratings on Wednesday removed its positive ratings watch on American International Group Inc.'s Asian insurance unit, citing the apparent collapse of a $35.5 billion deal to sell the unit to Prudential PLC.

Fitch revised the ratings watch status on its "A+" insurer financial strength rating to "Evolving" from "Positive." The move signals that Fitch's rating on Bermuda-based American International Assurance Co. Ltd. could ultimately be revised upward or downward.

AIG said on March 1 that it had agreed to sell AIA to Britain's Prudential PLC. But on Wednesday, Prudential said it was negotiating with AIG about terminating the deal. It faltered because of resistance of Prudential shareholders to the high price, and AIG's refusal to accept less money.

Fitch said its revised watch status for AIA reflects "uncertainty around the company's future ownership" now that the deal with Prudential is likely to be scuttled.

The ratings agency had originally placed a positive watch on AIA because it was to be acquired by a higher-rated insurance company. Prudential's issuer default rating is "AA-," while AIG carries investment-grade "BBB" long-term issuer default and senior debt ratings from Fitch.