A.M. Best Affirms Ratings of AIG Europe Limited
LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of AIG Europe Limited (AEL) (United Kingdom). The outlook for both ratings is stable. AEL is a wholly owned subsidiary of American International Group, Inc. (AIG) (New York).
The ratings reflect AEL’s strong risk-adjusted capitalisation, excellent operating performance and strong business profile, which is supported by excellent distribution capabilities across Europe.
On 1 December 2012, AIG completed the restructuring of its European operations by merging Chartis Europe S.A. (France) into AEL. AEL is a UK-domiciled insurance company operating through a branch network in 26 European countries. Key drivers and benefits of the restructuring include the creation of a simpler and more transparent operating structure, increased capital fungibility, particularly in the context of the pending implementation of Solvency II, operational efficiencies and alignment with the pan-European management structure.
Following corrective actions taken to address weaker performance in recent years, including the withdrawal from unprofitable lines of business and the introduction of revised underwriting guidelines, AEL achieved a profit before tax for 2012 of GBP 338 million on a pro forma combined basis. A further improvement is expected to be reported for 2013, the first full year of operation of AEL as the single European company, with strong underwriting profits and good investment returns.
However, with premium rates remaining weak for many of AEL’s core lines of business, prospective performance continues to be subject to uncertainty. The effect on results of a prolonged economic downturn is also of concern, given the relatively high proportion of casualty and financial lines business underwritten. Nevertheless, as the European operations, now centred on one company, become better integrated with those of the wider group, AEL is expected to benefit from group-driven initiatives to improve performance and analytical capabilities.
AEL has a good business profile in the commercial insurance market, with a particularly strong competitive position in the aerospace, marine, energy and financial lines markets. In addition, the company is a significant writer of multinational programmes. Its competitive position is enhanced by excellent distribution capabilities and the ability to offer a broad range of products across a wide geographic area.
Factors that may lead to negative rating actions include a decline in risk-adjusted capitalisation, weaker than expected operating performance or deterioration in reserves. Factors affecting other subsidiaries within the wider AIG group could place upwards or downwards pressure on the ratings of AEL.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
This rating has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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