AIG capitalisation and Duperreault reassure AM Best

Ratings agency AM Best has removed American International Group (AIG) from ‘under review with negative implications’ and affirmed its Long-Term Issuer Credit Rating (Long-Term ICR) after analysing recent actions taken by the US insurers.

AIG had  reported a $3 billion loss in the fourth quarter of 2016 driven by its US casualty business. As a result, CEO Peter Hancock stepped down and was replaced by Brian Duperreault.

In January, AM Best had placed the ratings of AIG and its insurance subsidiaries under review with negative implications following the announcement that the group had again incurred material adverse reserve development, primarily relating to its US property/casualty long-tail business. The total amount of the group’s gross deficiency reported was $5.6 billion, which exceeded AM Best’s estimation.

“Had AIG actually been downgraded, it could have expected to see pressure on its ability to maintain and win major account business,” CreditSights analysts said in a May 23 note. “Given all of the recent issues at AIG, this would have been a black mark the company could have ill afforded,” according to the analysts.

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

Finally, AIG has announced Brian Duperreault as its new CEO, a move that brings his significant operating experience as an industry leader to the organization, the ratings agency said. From this review, it has been possible to make a satisfactory assessment that AIG’s consolidated risk-adjusted capitalization remains supportive of the ratings of AIG and its subsidiaries.

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