AM Best Revises Issuer Credit Rating Outlook to Positive for American International Group, Inc. and Its Property/Casualty Subsidiaries

Rhea-AI Summary

AM Best has upgraded the outlook for American International Group (AIG) to positive from stable for its Long-Term Issuer Credit Ratings (ICRs) while affirming its Financial Strength Rating (FSR) of A (Excellent). AIG's property/casualty subsidiaries received a positive outlook due to strong balance sheet strength and improving underwriting performance. Meanwhile, AIG's Life & Retirement Group retains stable ratings, supported by strong operating performance. However, both segments face challenges, including competitive pressures and execution risks related to recent organizational changes.

Positive

• Upgraded outlook for AIG's Long-Term ICRs to positive.
• Affirmed Financial Strength Rating of A (Excellent).
• Strong balance sheet strength in property/casualty subsidiaries.
• Recent improvements in underwriting performance.
• AIG Life & Retirement Group shows strong operating performance.

Negative

• AIG PC's operating performance is still considered marginal.
• Historical combined ratios lag behind peers.
• Execution risk associated with ongoing separation of AIG L&R.
• Long-term investment portfolio reallocation could adversely affect capital.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has revised the outlooks to positive from stable for the Long-Term Issuer Credit Ratings (Long-Term ICRs) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of American International Group, Inc.’s (AIG) property/casualty (P/C) insurance subsidiaries (collectively referred to as AIG PC). The outlook of the FSR is stable. At the same time, AM Best has revised the outlook to positive from stable and affirmed the Long-Term ICR of “bbb” (Good) of AIG (headquartered in New York, NY) [NYSE: AIG].

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.)

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 Best’s Capital Adequacy Ratio (BCAR), benefiting from improving underwriting performance, including 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 lagged composite peers materially. However, the positive Long-Term ICR outlook recognizes 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.

AM Best factored into the rating decision the announcement on Dec. 14, 2022, whereby the wholly owned subsidiary of AIG, AIG Financial Products Corp., filed a voluntary petition to reorganize under Chapter 11 bankruptcy.

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 2021 to the strong level, as measured by BCAR. This risk-adjusted capital position benefits from the large modified coinsurance agreement with Fortitude Reinsurance Company Ltd., which reduces much of the risk from the longer-term structured settlements book of business. The new holding company, Corebridge Financial, Inc., provides projections for leverage and coverage ratios that are within AM Best’s methodology guidelines and AIG’s statutory entities are expected to remain well-capitalized. However, AM Best notes that as the separation continues there will still be 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 strong competition within the segment, AIG L&R maintains a diversified product portfolio, along with 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 bank-owned/corporate-owned life insurance, 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 the outlook for the Long-Term ICRs revised to positive from stable and the FSR outlook maintained at stable 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 Performance Assessments, 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 © 2022 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/20221216005476/en/

Raymond Thomson, CPCU, ARe, ARM

Associate Director

+1 908 439 2200, ext. 5621

raymond.thomson@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Erik Miller, CFA

Director

+1 908 439 2200, ext. 5187

erik.miller@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What did AM Best announce about AIG's ratings?

AM Best revised the outlook for AIG's Long-Term ICRs to positive and affirmed its Financial Strength Rating of A (Excellent).

What is the significance of AIG's upgraded outlook?

The upgraded outlook indicates improved confidence in AIG's financial stability and operational improvements.

What challenges does AIG face despite the positive outlook?

AIG faces challenges such as marginal operating performance and execution risks related to organizational changes.

When did AIG Financial Products Corp. file for bankruptcy?

AIG Financial Products Corp. filed for Chapter 11 bankruptcy on December 14, 2022.

How does AM Best view the performance of AIG's Life & Retirement Group?

AM Best assesses AIG's Life & Retirement Group as having strong operating performance, despite competitive headwinds.