But it also revised the outlook for AIG and all of its operating companies to stable from negative, believing the firm will become more competitive and build upon operating improvements since its bailout - particularly at its SunAmerica division.
S&P downgraded Chartis' ratings one notch, to "A" from "A+." It kept the rest of AIG's ratings stable, including its overall "A-" rating and the "A+" rating on SunAmerica.
Chartis, AIG's property & casualty division, reported a $4.1 billion charge last quarter to bolster reserves - a move some investors hadn't expected. In a conference call on Friday, CEO Robert Benmosche and other executives attempted to shore up confidence about Chartis' strength. While Chartis is receiving higher claims than expected, they mostly pertain to legacy issues, they said.Still, S&P said that beyond the reserve boost, Chartis' underwriting results were lower than expected. Steven Ader, the primary credit analyst, noted that Chartis' accident-year combined ratio was 111.3% for the fourth quarter, a "marked deterioration" from the earlier part of 2010. "Although we believe that a combination of underwriting initiatives and a continued shift toward lower-volatility business lines will support future profitability, continued pricing pressure in the U.S and--to a lesser extent--in the International segment will hamper improvement," Ader said. AIG's stock was recently down 1.3% at $38.05. It has dropped sharply from a range of $40 to $43 in the days and weeks leading up to AIG's fourth-quarter report. Ader outlined a more bullish view for AIG's SunAmerica division, which provides life insurance and retirement products. He noted that SunAmerica's operating performance has continued to improve, despite increased competition. It has also been able to expand its distribution network and re-entered agreements with independent distributors that fled AIG due to its enormous government bailout. -- Written by Lauren Tara LaCapra in New York.
>To contact the writer of this article, click here: Lauren Tara LaCapra.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV