AM Best Affirms Credit Ratings of American International Group, Inc. and Its Subsidiaries

Rhea-AI Summary

AM Best has affirmed the Long-Term Issuer Credit Rating of “bbb” and a Financial Strength Rating of A (Excellent) for American International Group, Inc. (AIG) and its subsidiaries. The outlook remains stable. AIG's risk-adjusted capital level is at the strongest level, though historical performance has lagged peers due to poor underwriting in its property/casualty (P/C) segment. However, recent improvements and better risk management strategies are noted. The planned separation of AIG's life and retirement business is not expected to affect ratings in the near term, with positive capital and liquidity outlooks.

Positive

• Affirmed Long-Term Issuer Credit Rating of “bbb” and Financial Strength Rating of A (Excellent) for AIG.
• Stable outlook for ratings indicates confidence in company stability.
• Risk-adjusted capital level remains at the strongest level, enhancing financial resilience.
• Improving underwriting results and risk management strategies in the P/C segment.
• The planned separation of the life and retirement business may increase capital and liquidity.

Negative

• Historical performance has lagged behind composite peers due to poor underwriting results.
• Operating performance is still considered marginal despite recent improvements.
• Potential execution risk associated with the life and retirement business separation.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” (Good) of American International Group, Inc. (AIG) (headquartered in New York, NY) [NYSE: AIG]. AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of AIG’s property/casualty (P/C) insurance subsidiaries (collectively referred to as AIG PC). Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) for the members of the AIG Life & Retirement Group (AIG L&R). The outlook of these Credit Ratings (ratings) is stable. (Please see below for a detailed listing of the companies and ratings.)

AIG’s consolidated risk-adjusted capital level, as measured by Best’s Capital Adequacy Ratio (BCAR), has been maintained at the strongest level. AIG’s historical consolidated performance has been marginal when compared with composite peers due to poor underwriting results from its P/C segment, albeit showing significant underlying improvement in recent years. Full-year 2020 consolidated operating results were negatively impacted by significant catastrophe losses, including the effects from the COVID-19 pandemic, with net income unfavorably impacted by the Fortitude Reinsurance Company Ltd. (Fortitude Re) separation. However, underwriting results in the first half of 2021 have shown improvement and are more consistent with the risk selection and reinsurance risk mitigation strategies implemented by AIG in recent years.

AM Best does not expect AIG’s planned separation of its life and retirement business to have a near-term impact on its rating. This is because the loss of life and retirement segment’s profitability and diversification is offset by an anticipated increase in available capital and liquidity with a more focused business profile, and improving operating performance from its core P/C operations in a hardening market.

The ratings of AIG PC reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, favorable business profile and appropriate enterprise risk management (ERM).

AIG PC’s risk-adjusted capital position remains at the strongest level, as measured by BCAR, benefiting from a reduction in net premiums written and net loss reserves, which declined at a larger rate than surplus, while also benefiting from strong reinsurance support from highly rated reinsurers.

AM Best views AIG PC’s operating performance as marginal. The group’s historical combined and operating ratios have materially lagged composite peers. However, AM Best notes that the group’s operating performance has demonstrated a steady improving trend in more recent years, attributable to numerous underwriting and risk management initiatives, as well as continued positive pricing momentum in most key business lines.

The ratings of AIG L&R reflect its balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, favorable business profile and appropriate ERM.

AIG L&R’s risk-adjusted capital position marginally improved in 2020, but remains stable at the adequate level, as measured by BCAR. This risk-adjusted capital position benefits from the large modified coinsurance agreement with Fortitude Re, which reduces much of the risk from the longer-term structured settlements book of business. The new holding company projections for leverage and coverage ratios are within AM Best’s methodology guidelines and AIG’s statutory entities are expected to remain well-capitalized; however, AM Best notes that with this separation comes execution risk and current projections may not materialize as planned. Additionally, longer-term reallocation of AIG L&R’s investment portfolio may have an adverse impact on future risk-adjusted capital.

AM Best continues to assess AIG L&R segment’s operating performance as strong. While AM Best acknowledges the headwinds of the lower rate environment and strong competition within the segment, AIG L&R maintains a diversified product portfolio and also maintains spread and fee income that is consistent with strong operating peers. AIG L&R’s individual and group retirement segments continue to produce consistent returns. While its life segment reported a loss in 2020, the institutional products segment, consisting of pension risk transfer, stable value wrap, guarantee investment contracts and BOLI/COLI, has been a growing portion of the business and is likely to see continued growth.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been affirmed with stable outlooks for the following P/C subsidiaries of AIG, which are collectively referred to as the AIG PC:

• 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
• Illinois National Insurance Company
• AIG Specialty Insurance Company
• AIU Insurance Company
• AIG Assurance Company
• AIG Insurance Company – Puerto Rico
• AIG Insurance Company of Canada
• AIG Insurance Hong Kong Limited
• Granite State Insurance Company
• Tudor Insurance Company
• Stratford Insurance Company
• Western World Insurance Company
• Blackboard Specialty Insurance Company
• Blackboard Insurance Company
• American International Group UK Limited
• American International Reinsurance Company, Ltd.
• AIG Asia Pacific Insurance Pte. Ltd.
• Validus Reinsurance, Ltd.
• Validus Reinsurance (Switzerland) Ltd.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been affirmed with stable outlooks for the following subsidiaries of AIG, which are collectively referred to as the AIG Life & Retirement Group:

• AGC Life Insurance Company
• American General Life Insurance Company
• United States Life Insurance Company in the City of New York
• The Variable Annuity Life Insurance Company

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211007006009/en/

Erik Miller, CFA

Associate Director

+1 908 439 2200, ext. 5187

erik.miller@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Michael Lagomarsino, CFA, FRM

Senior Director

+1 908 439 2200, ext. 5810

michael.lagomarsino@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best

FAQ

What is AIG's current credit rating?

AM Best has affirmed AIG's Long-Term Issuer Credit Rating at 'bbb' and Financial Strength Rating at 'A' (Excellent).

Why did AM Best affirm AIG's ratings?

AIG's strong risk-adjusted capital level and improving underwriting results contributed to the affirmation.

How does AIG's separation of its life and retirement business affect its ratings?

The separation is not expected to impact AIG's ratings in the near term, due to anticipated increases in capital and liquidity.

What does the stable outlook for AIG's ratings mean?

A stable outlook indicates that AM Best sees no significant changes in AIG's financial stability in the near future.

What are the areas of concern for AIG according to AM Best?

AIG's historical performance has been marginal compared to peers, and there's execution risk related to the planned business separation.