Although A.M. Best says property/casualty insurance loss reserves at American International Group remain deficient, the rating agency affirmed the “A” financial strength rating of AIG’s U.S. and Canadian property/casualty subsidiaries on Friday.

“Fluctuations in loss reserves have been more modest in recent years, and the group has acted to further stabilize reserves,” A.M. Best said in the rating announcement. “A.M. Best’s estimated deficiency of the group’s reserves continues to decline as a result of these actions, but it is A.M. Best’s expectation that reserves will continue to develop adversely over the near-to-mid-term.”

Best said the ratings reflect the group’s supportive level of risk-adjusted capitalization and solid operating earnings, as well as AIG’s leadership position in the global commercial lines insurance market.

On the other hand, underwriting results, which remain well below the group’s historical levels and A.M. Best’s expectation of continued adverse development of prior-years loss reserves are offsetting factors, as is the group’s exposure to natural and man-made catastrophe losses.

Best said the outlook for the ratings is stable, reflecting AIG’s position in the U.S. commercial market and its ability to lead, attract and retain clients by leveraging its significant global capacity. Other factors supporting the stable outlook are extensive product offerings and innovation, and AIG’s greater emphasis on technical pricing and predictive modeling.

The group has remained a leading provider of global commercial lines insurance products, with an operating scope that remains a key differentiator in its ability to provide products and services that meet the needs of global and local insureds. Premium and customer retentions remain consistent and favorable pricing actions continued in 2014. These actions have allowed for improvement in underwriting results for the year, although underwriting performance remains below the group’s historical levels.

“While reserve development remains a concern, the stable outlook suggests that any future reserve development will be within a level acceptable to A.M. Best.”

The group continues to generate positive operating returns despite challenges in restoring underwriting profitability, Best added.

Best also affirmed the FSR of “A” of American International Reinsurance Company Ltd. (AIRCO), a Bermuda-domiciled reinsurer, with a stable outlook.

Source: A.M. Best