A 2022 combined ratio of 92 for the property/casualty operations of American International Group is evidence of the success of the carrier’s multiyear turnaround that factored into an upgrade from Fitch Ratings.
Yesterday, Fitch announced that it has upped the insurer financial strength ratings of the rated property/casualty insurance subsidiaries of AIG to “A+” from “A.” Fitch also affirmed AIG’s Long-Term Issuer Default Rating (IDR) at “A-“. The rating outlook is stable for all the ratings.
According to the Fitch announcement, the rating upgrade reflects the improved operating performance of P/C operations over the last five years, indicated by a segment combined ratio of 92 in 2022 and 96 in 2021. The multiyear transformation efforts responsible for the results included substantial changes in business mix, reinsurance utilization and expense management, as well as a more favorable commercial insurance pricing environment.
Changes in risk appetite and catastrophe exposure management are anticipated to promote less volatile underwriting performance going forward, the Fitch statement said. In fact, although Fitch said that the holding company’s ratings are unlikely to be upgraded, in a standard section of rating action announcements delineating the factors that “could, individually or collectively, lead to positive rating action” for the ratings of the P/C operations, Fitch cited combined ratios sustained in the low 90’s, stability and further improvement in segment operating profits, and demonstration of further loss reserve stability or redundancies among factors that could prompt another upgrade. The reverse, however, could mean the ratings get kicked back down (sustained combined ratios over 100, reversion to material adverse reserve development, or declining risk-based capital ratios).
The announcement also address ratings for Corebridge Financial, the separated life and retirement business which IPOed last year, with AIG currently still retaining 77.7 percent ownership. Fitch affirmed Corebridge Financial long-term IDR at “A-“, and the IFS ratings of its life insurance subsidiaries at “A+”.
Fitch noted the further incremental share transactions over time are anticipated to move AIG’s ownership stake in Corebridge towards 50 percent or lower. “As a result of the separation, AIG is less diversified, but better positioned for further general [P/C] insurance growth, and has less investment interest rate and credit risk exposure,” Fitch said.
Source: Fitch Ratings