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A.M. Best Affirms Ratings of American International Group, Inc. and Its U.S. Property/Casualty Subsidiaries

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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

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

Copyright (c) 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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