AM Best Upgrades Issuer Credit Ratings for American International Group, Inc. and Its Property/Casualty Subsidiaries

Rhea-AI Summary

AM Best has upgraded the Long-Term Issuer Credit Ratings of American International Group, Inc.'s property/casualty insurance subsidiaries to 'a+' (Excellent) and affirmed the Financial Strength Rating of A (Excellent). The group's balance sheet strength is assessed as very strong, with improving underwriting performance and strong reinsurance support. AIG PC's operating performance has shown a steady improving trend, and its business profile is favorable, with deep expertise in commercial lines and diverse distribution channels.

Insights

Insurance Industry Analyst

The upgrade of American International Group, Inc.'s (AIG) property/casualty (P/C) insurance subsidiaries' Long-Term Issuer Credit Ratings (Long-Term ICRs) by AM Best signifies a positive assessment of the company's financial stability and underwriting performance. The upgrade from 'a' to 'a+' indicates a stronger confidence in AIG's ability to meet its ongoing insurance obligations. This is a crucial factor for policyholders, investors and partners who rely on AIG's financial integrity.

The affirmation of the Financial Strength Rating (FSR) at 'A' reflects continued confidence in the insurer's financial resilience. A key component of this resilience is AIG's risk-adjusted capital position, which, according to Best's Capital Adequacy Ratio (BCAR), remains at the strongest level. This suggests that AIG has a robust buffer to absorb potential losses, which is particularly relevant in the context of the P/C insurance industry, known for its exposure to volatile and unpredictable claims.

Additionally, the positive pricing momentum in key business lines is indicative of AIG's ability to adjust pricing in response to market conditions and risks, a factor that supports profitability. The company's diverse distribution channels and global market presence contribute to a favorable business profile that can help AIG to mitigate risks through geographic and product diversification.

Risk Management Consultant

The acknowledgment of improvements in AIG's underwriting and risk management initiatives by AM Best is significant. It underscores the company's commitment to enhancing its risk profile and operational efficiency. Effective underwriting practices are central to profitability in the insurance sector, as they determine the quality of the risks being assumed and the adequacy of the premiums charged.

Moreover, AIG's favorable business profile, with deep expertise in commercial lines, suggests a strategic advantage in underwriting complex risks. The ability to accurately assess and price such risks is a competitive edge in the P/C insurance market. The stable outlook for both the Long-Term ICRs and the FSR suggests that AM Best expects AIG's risk management practices to continue contributing to stable financial and operational performance.

For stakeholders, this translates into expectations of sustained risk-adjusted returns and the potential for stable dividends or share repurchases, assuming AIG's capital management strategy remains shareholder-friendly. The stable outlook also provides reassurance to clients and partners regarding AIG's reliability as a long-term business partner.

Financial Analyst

The revision of the outlook for AIG's Long-Term ICRs to stable from positive, while an upgrade, indicates that AM Best does not currently anticipate further upward rating movements in the near term. This stability can be attractive to conservative investors seeking predictable performance, although it may suggest limited upside potential for those looking for rapid growth.

The rating upgrade may have implications for AIG's cost of capital. Higher credit ratings generally allow for lower borrowing costs, which can enhance profitability and provide more flexibility in financial planning. This could lead to more strategic investments and acquisitions, enabling AIG to further solidify its market position.

While the upgraded ratings are favorable, it's important for investors to consider the broader industry context. The P/C insurance sector is cyclical and sensitive to large-scale events such as natural disasters and economic downturns. Thus, despite strong current ratings, external factors could still pose challenges to AIG's performance.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “a+” (Excellent) from “a” Excellent) and affirmed the Financial Strength Rating (FSR) 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 Long-Term ICRs has been revised to stable from positive, while the outlook of the FSR is stable. At the same time, AM Best has upgraded the Long-Term ICR to “bbb+” (Good) from “bbb” (Good) of AIG (headquartered in New York, NY) [NYSE: AIG]. The outlook of the Long-Term ICR has been revised to stable from positive. (Please see below for a detailed listing of the companies and ratings.)

The Credit Ratings (ratings) of AIG PC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate 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, while also benefiting from strong reinsurance support from highly rated reinsurers.

AM Best assesses AIG PC’s operating performance as adequate. The group’s historical combined and operating ratios have lagged composite peers. However, the upgrading of the Long-Term ICR recognizes AIG PC’s operating performance, which has demonstrated a steady and consistent improving trend in recent years, attributable to numerous underwriting and risk management initiatives, as well as continuing positive pricing momentum in most key business lines. Operating performance metrics are now comparable to similarly rated peers. AIG PC’s business profile is assessed as favorable, considering its market position and presence in domestic and global markets. The group has deep expertise in its commercial lines and utilizes many diverse distribution channels.

The Long-Term ICRs have been upgraded to “a+” (Excellent) from “a” (Excellent) and the FSR of A (Excellent) has been affirmed, with the outlook for the Long-Term ICRs revised to stable from positive 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.

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 © 2024 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/20240126213425/en/

Raymond Thomson, CPCU, ARe, ARM

Associate Director

+1 908 882 2394

raymond.thomson@ambest.com

Christopher Sharkey

Associate Director, Public Relations

+1 908 882 2310

christopher.sharkey@ambest.com

Erik Miller, CFA

Director

+1 908 882 2120

erik.miller@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 882 2318

al.slavin@ambest.com

Source: AM Best

FAQ

What are the upgraded Long-Term Issuer Credit Ratings of AIG PC?

The Long-Term Issuer Credit Ratings of AIG PC have been upgraded to 'a+' (Excellent) from 'a' (Excellent).

What is the Financial Strength Rating of AIG PC?

The Financial Strength Rating of AIG PC is affirmed at A (Excellent).

What is the outlook of the Long-Term ICRs and FSR of AIG PC?

The outlook of the Long-Term ICRs has been revised to stable from positive, while the outlook of the FSR is stable.

What are the key factors contributing to the balance sheet strength of AIG PC?

The balance sheet strength of AIG PC is assessed as very strong, with improving underwriting performance and strong reinsurance support from highly rated reinsurers.

What are the positive trends in AIG PC's operating performance?

AIG PC's operating performance has demonstrated a steady and consistent improving trend in recent years, attributable to numerous underwriting and risk management initiatives, as well as continuing positive pricing momentum in most key business lines.

What is the business profile of AIG PC?

AIG PC's business profile is assessed as favorable, considering its market position and presence in domestic and global markets, with deep expertise in commercial lines and diverse distribution channels.