Moody’s has assigned A2 insurance financial strength (IFS) ratings and stable outlooks to American International Group’s (AIG) new post-Brexit European carriers, AIG UK Limited and Luxembourg-based AIG Europe S.A. (AESA).
AIG recently formed these units in order to ensure continuity of service for it its European policyholders and business partners once the UK leaves the European Union (EU) in March 2019.
The subsidiaries will carry on AIG’s property and casualty (P&C) business in the UK and other European countries in place of its UK-based AIG Europe Limited (AIGEL) unit.
In October, AIG received approval from the High Court of England and Wales to transfer business from AIGEL to the new carriers in preparation for Brexit.
As part of the restructuring, AIGEL will be merged into AESA, and Moody’s will withdraw the existing IFS rating of AIGEL.
Moody’s said its ratings reflect the strong market position of AIG UK and AESA in UK commercial lines, as well as their diversified product offerings across Europe and conservative investment strategy, and the support provided by affiliates.
However, AIG has posted weak operating results in recent years, Moody’s noted, mainly due to adverse loss development and catastrophe losses, and its moderate capitalisation on a statutory basis.
AIG has responded to profit challenges by appointing several new P&C business leaders, tightening its policy limits, purchasing more reinsurance, reducing expenses, and shifting its resources toward more profitable segments such as multinational accounts, financial lines, credit lines and accident & health.
Moody’s stable rating outlook is based on a belief that AIG will improve its P&C performance globally and in Europe, reducing volatility from reserves and catastrophes and driving its combined ratio below 100%.
The ratings on AIG UK and AESA also incorporate explicit and implicit support from affiliates, including reinsurance ceded to AIG’s flagship P&C operations in the U.S and capital available from AIG parent as needed.
The European operations are a key part of AIG’s global P&C business, generating around one fifth of AIG’s gross written P&C premiums and serving many of the group’s multinational clients.
