OLDWICK, N.J.--(BUSINESS WIRE)--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.
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