A.M. Best Removes from Under Review and Affirms Ratings of American International Group, Inc. and Majority of Its Subsidiaries
June 02 2016 - 12:43PM
Business Wire
A.M. Best has removed from under review with negative
implications and affirmed the issuer credit rating (ICR) of
American International Group, Inc. (AIG) (headquartered in
New York, NY) [NYSE:AIG] and the financial strength ratings (FSR)
and ICRs of the majority of its insurance subsidiaries. In
addition, A.M. Best has removed from under review with negative
implications and upgraded the ICR to “a+” from “a” and affirmed the
FSR of A (Excellent) of AIG Asia Pacific Insurance Pte. Ltd.
(AIG API) (Singapore). The outlook assigned to each rating is
stable. Please see link below for a detailed listing of the
companies and ratings.
In January 2016, the ratings of AIG and its insurance
subsidiaries were placed under review with negative implications
following the strengthening of loss reserves in AIG’s non-life
business by $3.6 billion during the fourth quarter of 2015. The
total amount of the deficiency reported at that time exceeded A.M.
Best’s assumptions of loss reserve deficiency, excluding the
reversal of statutory discounts of reserves for workers’
compensation. The under review status also considered the potential
impact on AIG’s business profile and future earnings capacity from
the strategic actions being taken by management to improve
profitability and efficiency and maximize shareholder value.
A.M. Best has reviewed the year-end financial information of AIG
and its rated subsidiaries, in particular the impact of the reserve
strengthening, and also had the opportunity to discuss the planned
actions in greater detail with management. From this review, it has
been possible to make a satisfactory assessment that AIG’s
consolidated risk-adjusted capitalization remains supportive of the
ratings of AIG and its subsidiaries.
AIG continues to implement a series of strategic actions and
organizational changes to improve results and narrow its focus,
although there remains execution risk, as well as continuing
competitive pressures that could impede progress of the stated
plans. There is a continued strengthening of its balance sheet
through the sale of non -core businesses, as well as an improvement
in its financial flexibility. AIG’s financial leverage and coverage
ratios are within A.M. Best’s guidelines for the current
rating.
The ratings affirmations for the members of the AIG Property
Casualty US Insurance Group (AIG PC US) reflect the group’s
supportive level of risk-adjusted capitalization and its leadership
position in the global commercial lines insurance market. The
ratings also benefit from the support offered by its parent, AIG,
which includes a significant capital contribution following the
aforementioned reserve strengthening, as well as AIG’s financial
flexibility and overall diversification. Offsetting rating factors
include AIG PC US’ underwriting results which have lagged the
commercial casualty composite and broader P/C industry, continued
adverse development of prior years’ loss reserves and the execution
risks associated with management’s stated corrective actions.
The rating affirmations of AIG Life & Retirement
Group (AIG L&R) reflect the group’s acceptable
risk-adjusted capitalization, strong statutory and GAAP earnings
from core business lines and a very strong business profile with a
significant market presence. In addition, AIG L&R has a very
broad product mix and diversified distribution platform resulting
in increased sales of group retirement and individual annuity
products. Offsetting factors for AIG L&R include potential
earnings pressure due to spread compression on its large book of
interest-sensitive business, significant parental dividend payouts
and exposures to some higher risk asset classes.
The rating affirmations of American International Reinsurance
Company Ltd. (AIRCO), a Bermuda-domiciled reinsurer,
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 affirmation of the ratings of AIG Europe Limited
(AEL) (United Kingdom) reflects its strong risk-adjusted
capitalisation, good operating performance and a strong business
profile that is supported by excellent distribution capabilities
across Europe. Partially offsetting rating factors include
operating performance that has shown some volatility in recent
years but is generally good, as well as changes in senior
management at AEL.
The ICR upgrade of AIG API reflects the company’s strong
business profile, improving financial performance and strong
risk-adjusted capitalization, as measured by Best’s Capital
Adequacy Ratio (BCAR). AIG API’s strong business profile in
Singapore’s non-life market has been demonstrated by its ability to
grow new lines of business as core lines have softened, while
maintaining good profitability. A simplified intra-group
reinsurance arrangement that has been rolled out to AIG API
enhances its risk-adjusted capitalization and profitability.
Offsetting rating factors include uncertainty surrounding the
company’s capital targets as capital requirements have decreased
with the new group reinsurance arrangement and due to potential
strategy changes at the parent company level.
The rating affirmations of AIG Insurance Hong Kong
Limited (AIG HK) reflect its improved risk-adjusted
capitalization level as the company reduced its overall risk
retention in 2015. Partially offsetting rating factors are the
company’s continued volatile underwriting results, which are mainly
attributable to unfavorable loss experience in the general
liability (workers’ compensation) and financial lines of business,
and a consistently higher expense ratio relative to its industry
peers. AIG HK’s market share in Hong Kong has deteriorated over the
past few years and will continue to be challenged by the
competitive market environment.
For a complete listing of AIG and its subsidiaries’ FSRs and
ICRs, please visit American International Group Inc.
Ratings are communicated to rated entities prior to publication,
and unless stated otherwise, the ratings were not amended
subsequent to that communication.
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 see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160602006242/en/
A.M. BestJacqalene Lentz, +1 908 439 2200, ext.
5762Managing Senior Financial Analyst -
P/Cjacqalene.lentz@ambest.comorWilliam Pargeans, +1
908 439 2200, ext. 5359Assistant Vice President -
L/Hwilliam.pargeans@ambest.comorDavid Drummond, +44
20 7397 0327Senior Financial
Analystdavid.drummond@ambest.comorVivian Cheung, +852
2827 3421Senior Financial
Analystvivian.cheung@ambest.comorChi-Yeung Lok, +65
6589 8400, ext. 211Senior Financial
Analystchi-yeung.lok@ambest.comorChristopher Sharkey,
+1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim
Peavy, +1 908 439 2200, ext. 5644Assistant Vice
President, Public Relationsjames.peavy@ambest.com
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