AIG given negative outlook

Ratings agency notes “subpar” track record of insurance giant

AIG given negative outlook

Insurance News

By Jordan Lynn

AIG has seen its outlook revised to negative by global ratings agency Standard & Poor’s.

The outlook was formerly listed as ‘stable’, but the ratings agency said that challenges in the commercial insurance segment have led to the revision.

“We believe AIG’s recent track record of delivering on strategic goals, specifically within its P/C Commercial Insurance segment, has been subpar and subject to revisions, while its quality of consolidated earnings have somewhat weakened over the last few years,” the ratings agency said in a statement.

“As a result, we are revising our rating outlook to negative, reflecting our view that continued slower-than-expected progress in improving operating fundamentals could weigh on our ratings on AIG over the next 12 to 24 months.”

The ratings agency affirmed the ‘A+’ insurer financial strength rating of the international firm and said the affirmation reflects the “very strong” business risk profile of the firm and its strong financial risk profile.

The ratings agency said that it expects the group to post a combined ratio of 104% for all its property and casualty business which is likely to be weaker than many of its global, multiline insurer counterparts.

The management changes of the company, which announced that Brian Duperreault would replace Peter Hancock as CEO last month, were also noted by the ratings agency. As the sixth CEO of the firm in nine years, S&P said that while Duperrault’s “track record speaks for itself,” his succession comes at a “precarious time.”

“While Brian Duperreault’s recent appointment addresses CEO succession uncertainty, in our view it may take a while to turn the commercial operations around and meaningfully improve operating performance and AIG’s earnings quality,” the ratings agency continued.

S&P’s move comes just weeks after A.M. Best gave the firm its tick of approval, by removing it from under review with negative implications and affirming its other ratings.

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