2007 Annual Report - AIG.com

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
These credit ratings are current opinions of the rating agen- downgrades could also trigger the application of termination
cies. As such, they may be changed, suspended or withdrawn at provisions in certain of AIG’s contracts, principally agreements
any time by the rating agencies as a result of changes in, or entered into by AIGFP and assumed reinsurance contracts entered
unavailability of, information or based on other circumstances. into by Transatlantic.
Ratings may also be withdrawn at AIG management’s request.
It is estimated that, as of the close of business on Febru-
This discussion of ratings is not a complete list of ratings of AIG ary 14, 2008, based on AIGFP’s outstanding municipal GIAs and
and its subsidiaries.
financial derivatives transactions as of such date, a downgrade of
‘‘Ratings triggers’’ have been defined by one independent AIG’s long-term senior debt ratings to ‘Aa3’ by Moody’s or ‘AA – ’
rating agency to include clauses or agreements the outcome of by S&P would permit counterparties to call for approximately
which depends upon the level of ratings maintained by one or $1.39 billion of collateral. Further, additional downgrades could
more rating agencies. ‘‘Ratings triggers’’ generally relate to events result in requirements for substantial additional collateral, which
which (i) could result in the termination or limitation of credit could have a material effect on how AIGFP manages its liquidity.
availability, or require accelerated repayment, (ii) could result in The actual amount of additional collateral that AIGFP would be
the termination of business contracts or (iii) could require a required to post to counterparties in the event of such downcompany
to post collateral for the benefit of counterparties. grades depends on market conditions, the fair value of the
AIG believes that any of its own or its subsidiaries’ contractual outstanding affected transactions and other factors prevailing at
obligations that are subject to ‘‘ratings triggers’’ or financial the time of the downgrade. Additional obligations to post collateral
covenants relating to ‘‘ratings triggers’’ would not have a material would increase the demand on AIGFP’s liquidity.
adverse effect on its financial condition or liquidity. Ratings
94 AIG 2007 Form 10-K