AIG removed from “under review” rating watch

Global insurer gets new CEO, loses negative rating status

AIG removed from “under review” rating watch

Insurance News


Ratings agency A.M. Best has given American International Group (AIG) its tick of approval by removing the insurer from the “under review with negative implications” status. It has also affirmed AIG’s Long-Term Issuer Credit Rating (Long-Term ICR), and the Financial Strength Ratings (FSR) and Long-Term ICRs of the company’s insurance subsidiaries. A.M. Best also assigned a “stable” outlook to these ratings.

In January this year, A.M. Best placed AIG and its insurance subsidiaries under review with negative implications following the announcement that the group had again incurred material adverse reserve development, primarily relating to its US property/casualty long-tail business.

The total amount of the group’s gross deficiency reported was US$5.6 billion, which exceeded A.M. Best’s estimation. The under-review status also considered the potential impact on AIG’s risk-adjusted capitalization, liquidity, franchise value and future earnings capacity from the corrective actions being taken by management to improve profitability and meet shareholder return targets.

A.M. Best said it analysed the most recent financial information of AIG and its rated subsidiaries, specifically:
  • the impact of the reserve development
  • the benefit of the adverse development cover and related loss portfolio transfer
  • an assessment of the adequacy of the group’s current reserve position

A.M. Best also has discussed with AIG management and reviewed the viability of the planned corrective actions, capital return goals and organizational changes, including the new modular management framework.

Earlier this month, AIG announced Brian Duperreault as its new CEO. The ratings agency said the new chief “brings his significant operating experience as an industry leader to the organization.”

“From this review, it has been possible to make a satisfactory assessment that AIG’s consolidated risk-adjusted capitalization remains supportive of the ratings of AIG and its subsidiaries,” said the agency.

“This lessens A.M. Best’s immediate concerns regarding the execution risk of successfully implementing the corrective actions taken to improve overall operating performance, and susceptibility to reduced credibility of its franchise value.”

 AIG maintains adequate liquidity and financial flexibility, while its financial leverage and coverage ratios are within A.M. Best’s guidelines for its current rating.

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