A.M. Best Affirms Ratings of American International Group, Inc. and Its U.S. Property/Casualty Subsidiaries
February 27 2015 - 12:05PM
Business Wire
A.M. Best has affirmed the issuer credit rating (ICR) of
“bbb” of American International Group, Inc. (AIG) (New York,
NY) [NYSE:AIG]. Concurrently, A.M. Best has affirmed the financial
strength rating (FSR) of A (Excellent) and the ICRs of “a” of AIG’s
U.S. and Canadian property/casualty subsidiaries (collectively
referred to as the AIG Property Casualty US Insurance Group
(AIG PC US) headquartered in New York, NY. At the same time, A.M.
Best has affirmed the FSR of A (Excellent) and the ICR of “a” of
American International Reinsurance Company Ltd. (AIRCO), a
Bermuda-domiciled reinsurer. The outlook for the ratings above is
stable. (See below for a detailed listing of the companies and
ratings.)
The ratings for the members of AIG PC US reflect the group’s
supportive level of risk-adjusted capitalization, solid operating
earnings and AIG’s leadership position in the global commercial
lines insurance market. Offsetting rating factors include
underwriting results, which remain well below the group’s
historical levels; A.M. Best’s expectation of continued adverse
development of prior years’ loss reserves; and the group’s exposure
to natural and man-made catastrophe losses. The stable outlook
reflects AIG’s position in the U.S. commercial market; its ability
to lead, attract and retain clients by leveraging its significant
global capacity; extensive product offerings and innovation; and
its greater emphasis on technical pricing and predictive modeling.
The group continues to generate positive operating returns despite
challenges in restoring underwriting profitability. While reserve
development remains a concern, the stable outlook suggests that any
future reserve development will be within a level acceptable to
A.M. Best. A.M. Best also expects that the group will continue to
maintain a supportive level of risk-adjusted capitalization driven
by favorable net earnings while providing shareholder dividends to
its parent in accordance with historical norms.
AIG PC US’ level of risk-adjusted capitalization continues to be
supportive of the ratings, despite a large dividend payment to
AIG.
The group has remained a leading provider of global commercial
lines insurance products, with an operating scope that remains a
key differentiator in its ability to provide products and services
that meet the needs of global and local insureds. Premium and
customer retentions remain consistent and favorable pricing actions
continued in 2014. These actions have allowed for improvement in
underwriting results for the year, although underwriting
performance remains below the group’s historical levels.
Fluctuations in loss reserves have been more modest in recent
years, and the group has acted to further stabilize reserves. A.M.
Best’s estimated deficiency of the group’s reserves continues to
decline as a result of these actions, but it is A.M. Best’s
expectation that reserves will continue to develop adversely over
the near-to-mid-term.
AIRCO’s ratings acknowledge its supportive level of
risk-adjusted capitalization, the historical profitability of the
business it assumes from its affiliates and its role as the primary
Bermuda presence for AIG. Offsetting these factors are AIRCO’s
historically limited direct business profile and substantial gross
exposure to a closed block of U.K. deferred and payout annuities,
which are retroceded to an affiliated. The outlook reflects A.M.
Best’s expectation that the company’s business will continue to
generate favorable results and that risk-adjusted capitalization
will be maintained at a level that is supportive of the
ratings.
Historically, A.M. Best has considered parental support and
financial flexibility when evaluating AIG’s property/casualty
subsidiaries. While there is no specific consideration of those
factors in the current ratings of the companies, AIG has continued
to strengthen its balance sheet through the sale of non-core
businesses, and demonstrate improvement in its financial
flexibility. AIG’s financial leverage and coverage ratios are
within A.M. Best’s guidelines for the current rating.
Factors that could lead to positive rating actions include
continued sustained improvement in underwriting and operating
performance while maintaining supportive levels of risk-adjusted
capitalization. Factors that may drive downward movement in the
ratings or outlooks include deterioration in risk-adjusted
capitalization below the level required to support the ratings;
underwriting or operating performance that is not in line with A.M.
Best's expectations; recognition of adverse development of loss
reserves in excess of the deficiency assumed by A.M. Best; or
deterioration in the financial condition of AIG.
The FSR of A (Excellent) and the ICRs of “a” have been affirmed
for the following companies, which are collectively referred to as
the AIG Property Casualty US Insurance Group:
- National Union Fire Insurance
Company of Pittsburgh, Pa.
- American Home Assurance
Company
- Lexington Insurance Company
- Commerce and Industry Insurance
Company
- AIG Property Casualty
Company
- The Insurance Company of the State
of Pennsylvania
- New Hampshire Insurance
Company
- Granite State Insurance
Company
- Illinois National Insurance
Company
- AIG Specialty Insurance
Company
- AIU Insurance Company
- AIG Assurance Company
- AIG Insurance Company - Puerto
Rico
- AIG Insurance Company of
Canada
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s
Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Analyzing Insurance Holding Company
Liquidity
- Catastrophe Analysis in A.M. Best
Ratings
- Equity Credit for Hybrid
Securities
- Evaluating Country Risk
- Insurance Holding Company and Debt
Ratings
- Rating Members of Insurance Groups
- Rating Natural Catastrophe Bonds
- Risk Management and the Rating Process
for Insurance Companies
- The Treatment of Terrorism Risk in the
Rating Evaluation
- Understanding BCAR for Canadian
Property/Casualty Insurers
- Understanding BCAR for
Property/Casualty Insurers
- Understanding Universal BCAR
This press release relates to rating(s) that have been
published on A.M. Best's website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. Best CompanyJacqalene Lentz, 908-439-2200,
ext. 5762Senior Financial
Analystjacqalene.lentz@ambest.comorJennifer Marshall,
908-439-2200, ext. 5327Assistant Vice
Presidentjennifer.marshall@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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