Stand

While the much publicised US bailout of AIG is almost complete, to the delight of the investment markets, it has been noted that the credit rating agencies are yet to respond with an increase in the group’s credit rating. Just prior to the fall in the AIG share price many of the more prominent credit agencies in the US reduced the group’s credit rating by a significant amount. There had been hopes that this would bounce back after the bailout but it seems as though the agencies are in no rush.

Many of the agencies seem to be concerned about the corporate structure of the group as there will need to be a ring-fencing approach to tax payer’s money from what is still a very dangerous and risky scenario. How involved will the government become in the operations? What are the long term plans? Is the balance sheet strong enough for the short, medium and longer term?

These are all questions which will be answered in due course but until they are there is little chance of an immediate change in credit ratings. There is also general concern about the long term state of the insurance market but a rumoured US government bailout plan for the mortgage industry appears to be nearing fruition – something which should help the insurance market.