AIG_PRI_pms2995AIG ongoing focus on restructuring and deleveraging got a vote of confidence from Fitch Ratings.

Fitch affirmed the insurer financial strength ratings of American International Group’s property/casualty subsidiaries at ‘A,’ and its U.S. life insurance subsidiaries at ‘A+’. Also, the ratings agency affirmed AIG’s long-term Issuer Default Ratings at ‘A-‘, and senior debt obligations at ‘BBB+’.

Those ratings affirmations also come with a stable outlook, Fitch said.

Those good marks reflect, in part, AIG’s ongoing success in restructuring and deleveraging, Fitch said.

“AIG continues to execute on its plans to further tighten operational focus,” Fitch noted, such as the proposed sale of its mortgage insurance subsidiary to Arch Capital Group for $3.4 billion, and then completed sale of its independent broker-dealer network for a $225 million pre-tax gain. Another factor cited by Fitch: AIG’s reduced investment in People’s Insurance Company Group of China, Ltd.

Fitch is also bullish over AIG’s plans to reduce operating expenses by 14 percent and the goal to improve its property/casualty loss ratio by 6 points over the next two years, in part through the curtailing of unprofitable segments. Along these lines, Fitch cited AIG’s Q1 2016 decision to sign a two-year reinsurance deal that cedes a proportional share of its new and renewal U.S. casualty portfolio.

As well, AIG’s life insurance subsidiaries, have faced hampered operating results in 2015 and 2016 (so far), due to lower investment returns and other actuarial investments. Fitch cited AIG’s plan to improve returns here, too, by narrowing its distribution and product focus, and reducing its exposure to alternative assets.

Fitch also made particular mention of AIG’s plan to return at least $25 billion to shareholders through 2017, funded, in part, by asset divestitures, reinsurance transactions and debt financing. So far, AIG has returned $8 billion to shareholders, and Fitch said that “this is one of the largest returns of capital relative to existing shareholders’ equity” that it had observed “in many years in the insurance industry.”

From a credit perspective, Fitch said that AIG’s actions here are “aggressive.”

AIG’s streamlining appears far from finished. Recently, reports surfaced that the insurer was in early talks to sell its Lloyd’s insurance operations to the Canada Pension Plan Investment Board.

Source: Fitch Ratings

Topics AIG