AM Best affirms AIG’s ratings but warns improvement needed in general insurance

AM Best has affirmed the ratings of AIG and most of its subsidiaries with a stable lookout, but warned that failure to make improvements in general insurance could cause negative rating action.

The ratings agency has affirmed AIG’s ‘bbb’ long-term issuer credit rating (ICR) and its A financial strength ratings. It has also affirmed the ‘a’ long-term ICRs of most of its P&C insurance subsidiaries. The credit ratings have a stable outlook.

AM Best said the ratings reflect AIG’s very strong consolidated risk-adjusted capitalisation. It said the group’s life and retirement segment has performed very strongly and offset “ongoing poor performance” in its general insurance business and diversified business platform.

The ratings agency said while AIG’s general insurance operations continue to fall short of its expectations, the stable outlook reflects management’s ongoing corrective actions.

This includes enhancing senior management talent, taking aggressive re-underwriting initiatives, a material reduction in gross limits, greater use of reinsurance and stronger rate adequacy, AM Best said.

But it wants to see more from this side of the business. Failure to improve could see negative ratings action, added the ratings agency.

“Failure to report improvements in its general insurance operations over the short-term could place pressure on the overall balance sheet strength of AIG and the operating companies, due in part to the need to service holding company obligations through subsidiary dividends, resulting in negative rating pressure,” said AM Best.

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