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AM Best affirms AIG ratings following review

May 23, 2017

AM Best has affirmed the ratings of AIG and its insurance subsidiaries and restored the ratings outlook to stable, following a review that began with negative implications earlier this year.

In January, AM Best placed AIG’s ratings under review with negative implications after the US insurance giant said that it was expecting a material prior year adverse development charge in the fourth quarter of 2016, which it later confirmed to be a greater-than-expected $5.6bn reserve deficiency.

This came as the carrier announced a mammoth adverse development reinsurance agreement with Berkshire Hathaway's National Indemnity Company.

However, after analysing the carrier’s most recent financials, the ratings agency said it had been “possible to make a satisfactory assessment" that AIG's consolidated risk-adjusted capitalisation remains supportive of the A financial strength rating given to its operating units.

AM Best also acknowledged the appointment of newly instated AIG CEO Brian Duperreault, citing his “significant operating experience as an industry leader.

In March, then AIG CEO Peter Hancock announced his resignation following a lack of shareholder support for his continued role at the helm of the company, being replaced by Duperreault earlier this month.

"AM Best has analysed the most recent financial information of AIG and its rated subsidiaries, in particular: the impact of the reserve development, the benefit of the adverse development cover and related loss portfolio transfer and an assessment of the adequacy of the group's current reserve position," the ratings company said.

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

The analysis "lessens AM 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 (AIG's) franchise value."

AIG maintains adequate liquidity and financial flexibility, while its financial leverage and coverage ratios are within AM Best’s guidelines for its current rating,” the ratings agency added.