A.M. Best Affirms Ratings of AIG Asia Pacific Insurance Pte. Ltd.
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of AIG Asia Pacific Insurance Pte. Ltd. (AIG API) (Singapore) and its fully-owned subsidiaries, AIG Australia Limited (AIG Australia) (Australia) and AIG Insurance Hong Kong Limited (AIG Hong Kong) (Hong Kong). The outlook for the FSR of AIG API is stable, while the outlook for the ICR is positive. The outlook for the FSR and the ICRs of AIG Australia and AIG Hong Kong are also stable. The ultimate parent company is American International Group, Inc. (AIG) (New York, USA) [NYSE: AIG].
AIG API’s ratings primarily reflect the company’s excellent risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), its good financial performance, its broad geographic footprint and business profile as AIG’s property/casualty hub in Asia (excluding Japan). A simplified intra-group reinsurance arrangement that is gradually being rolled out among AIG API’s subsidiaries is expected to help reduce the company’s capital requirements and potential volatility.
Offsetting rating factors include the uncertainty surrounding the company’s new capital targets. As the new intra-group reinsurance arrangement is expected to reduce capital requirements and claims volatility, it is expected that the company will reduce its capital targets.
AIG Australia’s ratings mainly reflect its strong risk-adjusted capitalization, as measured by BCAR, and very good operating performance. The ratings also consider the various support provided by AIG, which includes reinsurance and risk management. A key offsetting factor is the company’s high dividend payout ratio. As a result of the dividends paid in FY2012 and FY2013, AIG Australia’s risk-based capitalization leverage ratios and liquidity ratios have come down over the past two years.
AIG Hong Kong’s ratings reflect its strong market presence in selected commercial and personal non-life insurance segments in Hong Kong, consistently favorable underwriting results in the accident and health line, as well as its supportive risk-adjusted capitalization, as measured by BCAR, and the company’s conservative and liquid investment portfolio. These positive rating factors are partially offset by the company’s relatively volatile year-on-year underwriting results over past five years, which are evident in workers’ compensation and financial lines businesses, and the company’s relatively high management expense ratios compared to its Hong Kong non-life peers.
Positive rating action on AIG API could occur if it maintains its excellent capitalization and its diversified underwriting portfolio continues to grow profitably. A material reduction in the company’s capitalization could result in negative rating action.
AIG Australia is well positioned at its current rating level. Negative rating actions could occur if there is a significant worsening of its operating results and a substantial deterioration in absolute or risk-based capitalization.
AIG Hong Kong is well positioned at its current rating level. Negative rating actions for AIG Hong Kong could occur if there is a significant deterioration of the company’s operating results or risk-adjusted capitalization.
Any unfavorable rating actions on AIG could also put downward pressure on all three companies’ ratings.
The methodology used in determining these interactive 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:
- Catastrophe Analysis in A.M. Best Ratings
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
- Rating Members of Insurance Groups
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 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 (c) 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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