A.M. Best Lifts AIG’s Ratings ‘Under Review’ Status Following Duperreault’s Arrival

A.M. Best this week released American International Group from “under review” special scrutiny following the insurer’s bringing on industry veteran Brian Duperreault as president and chief executive officer and after reviewing recent financial data and meeting with AIG management.

“AIG maintains adequate liquidity and financial flexibility, while its financial leverage and coverage ratios are within A.M. Best’s guidelines for its current ratings,” A.M. Best said on May 23.

In January, the ratings agency placed under review with negative implications the long-term issuer credit rating (ICR) of “bbb” for AIG and the financial strength ratings and long-term ICRs of its insurance subsidiaries. The main reason cited at the time was AIG’s disclosure about a “material adverse reserve adjustment” for its U.S. commercial business, with a reported $5.6 billion gross deficiency.

Duperreault’s appointment in mid-May helped shift A.M. Best’s opinion. Duperreault’s arrival at AIG is “a move that brings his significant operating experience as an industry leader to the organization,” A.M. Best cited as one of the reasons for lifting the review.

A.M. Best said it also analyzed more recent financial information from AIG and its subsidiaries, including the impact of the reserve development, the benefit of the adverse development cover and related loss portfolio transfer, as well as an assessment of reserve adequacy. The ratings agency said it also considered, after talking with AIG management, “the viability of the planned corrective actions, capital return goals and organizational changes, including the new management framework.”

All of these factors combined let A.M. Best “make a satisfactory assessment that AIG’s consolidated risk-adjusted capitalization remains supportive of AIG and its subsidiaries,” it said. In turn, this has helped alleviate the rating agency’s initial concerns.

Duperreault, speaking to investors on the first full day of his job, rejected the idea of splitting AIG into pieces and simply returning money back to shareholders, advocating instead plans to build shareholder value through expansion and growing its businesses. Other ideas he pledged would be a focus of his leadership: underwriting discipline, diversification and growth to help rebound its suffering commercial property underwriting business.

Source: A.M. Best