A.M. Best has affirmed the Long-Term Issuer Credit Rating
(Long-Term ICR) of American International Group, Inc. (AIG)
(headquartered in New York, NY) [NYSE: AIG] and the Financial
Strength Ratings (FSR) and Long-Term ICRs of its insurance
subsidiaries. The outlook of these Credit Ratings (ratings) is
stable. (Please see below for a detailed listing of the companies
and ratings.)
AIG’s consolidated risk-adjusted capitalization remains at the
strongest level and is supported by its favorable liquidity and
financial flexibility. AIG’s financial leverage measures are within
A.M. Best’s guidelines for its current rating, with adjusted
debt-to-total-capital of approximately 27% at first quarter 2018.
This figure is adjusted by removing the debt backed by assets and
allowing for hybrid equity credit. Interest coverage ratios are
lower than average driven by poor underwriting performance on the
general insurance business in recent years. Despite significant
return of capital initiatives under prior management, which is
anticipated to be reduced going forward, AIG maintains ample
holding company cash and investments to provide additional
liquidity and flexibility for the group.
AIG has incurred sizable investment and underwriting losses over
the last decade, as well as significant changes in its operating
and capital structure and its senior management. The most current
management objectives include profitable growth, capital
efficiencies and enhancing the senior management team. This focus
on growing the group’s general insurance operations and limiting
underwriting losses through enhanced reinsurance protection,
re-underwriting and expense control, somewhat lessens A.M. Best’s
immediate concerns regarding the execution risk of successfully
implementing corrective actions to improve overall operating
performance, and susceptibility to reduced credibility of its
franchise value. A.M. Best will continue to monitor the group’s
plans and progress, including its pending acquisition of Validus
Holdings, Ltd., which is anticipated to close shortly.
AIG Property Casualty US Insurance Group’s (AIG PC US)
ratings reflects its balance sheet strength, which A.M. Best
categorizes as strongest, as well as its marginal operating
performance, favorable business profile and appropriate enterprise
risk management (ERM).
The rating affirmations for the members of AIG PC US also
reflect the benefit the group receives by being a part of the AIG
enterprise, which includes AIG’s liquidity and financial
flexibility, diversified and dominant business profile and
profitable life and retirement lines businesses. AIG’s overall
support has helped to limit the negative impact of the historical
underwriting losses AIG PC US incurred on its long-tail casualty
business, and has given the group time to achieve a noticeable
benefit from the corrective actions. AIG PC US maintains the
strongest risk-adjusted capitalization and a favorable leadership
position in the global commercial lines insurance market.
Additionally, AIG PC US should benefit from the leadership and
experience of its expanding and experienced senior management team.
Offsetting rating factors include AIG PC US’ underwriting results,
which have lagged the commercial casualty composite and the broader
property/casualty industry; continued adverse development of prior
years’ loss reserves; and the execution risks associated with
management’s stated corrective actions and restructuring measures,
given the higher-than-expected underwriting losses in the first
quarter of 2018.
AIG Life & Retirement Group’s (AIG L&R) ratings
reflect its balance sheet strength, which A.M. Best categorizes as
adequate, as well as its very strong operating performance,
favorable business profile and appropriate ERM.
The rating affirmations of AIG L&R are due to the group’s
very strong operating performance that has been achieved through a
diversified product offering with all major segments of business,
adding to operational profitability. The ratings also reflect its
favorable business profile, with significant economies of scale and
leadership positions in many lines of business. Despite the robust
profile and operating performance, much of the group’s strong
returns have not been retained but rather have been sent back to
the parent company for general corporate purposes, limiting capital
and surplus growth. AIG L&R risk-based capital and overall
balance sheet assessment is adequate, with strong financial
flexibility and liquidity offset by a decline in the quality of
capital due to the financing of redundant reserves through
reinsurance.
American International Reinsurance Company Ltd.’s (AIRCO)
ratings reflect its balance sheet strength, which A.M. Best
categorizes as strongest, as well as its strong operating
performance, limited business profile and appropriate ERM.
The rating affirmations of 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.
The rating affirmations of AIG Insurance Hong Kong
Limited’s (AIG HK) reflect AIG HK’s balance sheet strength,
which A.M. Best categorizes as very strong, as well as its adequate
operating performance, neutral business profile and appropriate
ERM.
The ratings also reflect the support the company receives from
the parent group. AIG HK’s very strong risk-adjusted
capitalization is underpinned by its conservative investment
strategy and supportive intercompany reinsurance arrangements
within the AIG group. The company has delivered positive operating
results over the past few years, attributed to a stable stream of
interest income from bank deposits, which offsets underwriting
losses driven by its higher-than-average, albeit gradually
improving, expense ratio. AIG HK ranks as the sixth-largest insurer
in Hong Kong’s non-life segment, with a market share of 3.4% based
on gross premiums written in 2017. The company’s underwriting
portfolio continues to focus on expanding commercial businesses,
such as casualty and financial lines, with multinational clients
through optimizing services and tools. Offsetting rating factors
include the higher-than-average expense ratio and the highly
competitive and fragmented operating environment in Hong Kong’s
non-life segment. The prolonged soft market may continue to place
pressure on the company’s underwriting profitability.
AIG Asia Pacific Insurance Pte. Ltd.’s (AIG API) ratings
reflect its balance sheet strength, which A.M. Best categorizes as
very strong, as well as its strong operating performance, favorable
business profile and appropriate ERM.
The rating affirmations of AIG API reflect the
company’s solid risk-adjusted capitalization, strong operating
results and established business profile. AIG API continues to
maintain its position as the market leader in Singapore, having
strong market shares in major lines of business. The company’s
underwriting performance also remains favorable with good combined
ratios. In accordance with an intragroup reinsurance arrangement,
AIG API cedes a majority of its premiums to other members of the
AIG group, which supports its risk-adjusted capitalization.
Offsetting rating factors include a trend of capital reductions as
AIG moves to improve capital efficiency across the group.
Additionally, concentration risk exists due to AIG API’s reliance
on AIG’s affiliates for reinsurance.
The Long-Term ICR of “bbb” of American International Group,
Inc. has been affirmed with a stable outlook.
The FSR of A (Excellent) and the Long-Term ICRs of “a” have been
affirmed with a stable outlook for the following subsidiaries of
American International Group, Inc., 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
- Illinois National Insurance
Company
- AIG Specialty Insurance
Company
- AIU Insurance Company
- AIG Assurance Company
- AIG Insurance Company – Puerto
Rico
- AIG Insurance Company of
Canada
- Granite State Insurance
Company
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have
been affirmed with stable outlook for the following subsidiaries of
American International Group, Inc., which are collectively
referred to as the AIG Life & Retirement Group:
- ACG Life Insurance Company
- American General Life Insurance
Company
- United States Life Insurance Company
in the City of New York
- The Variable Annuity Life Insurance
Company
The FSR of A (Excellent) and the Long-Term ICRs of “a” have been
affirmed with a stable outlook for the following international
affiliates of American International Group, Inc.:
- American International Reinsurance
Company Ltd.
- AIG Insurance Hong Kong
Limited
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have
been affirmed with a stable outlook for AIG Asia Pacific
Insurance Pte. Ltd. (AIG API).
This press release relates to Credit Ratings 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. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20180620006253/en/
A.M. BestDarian Ryan, CPA, +1 908-439-2200, ext.
5449Senior Financial
Analyst—P/Cdarian.ryan@ambest.comorErik Miller, CFA,
+1 908-439-2200, ext. 5187Senior Financial
Analyst—LHerik.miller@ambest.comorJames Chan, +852
2827 3418Senior Financial
Analystjames.chan@ambest.comorWesley Chia, +65 6303
5018Financial
Analystwesley.chia@ambest.comorChristopher Sharkey,
+1 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1 908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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