AIRCO’s ratings acknowledge its supportive level of risk-adjusted capitalization, the historical profitability of the business it assumes from its affiliates and its role as the primary Bermuda presence for AIG. Offsetting these factors are AIRCO’s historically limited direct business profile, substantial gross exposure to a closed block of U.K. deferred and payout annuities and the variability in reserves assumed from a U.K. affiliate. The outlook reflects A.M. Best’s expectation that the company’s business will continue to generate favorable results and that risk-adjusted capitalization will be maintained at a level that is supportive of the ratings.

The ratings of AIUI reflect its adequate level of risk-adjusted capitalization, historically favorable operating performance, restored focus on core businesses and its long-standing presence in the Japanese insurance market. Offsetting these rating factors are the variation in surplus and premium revenue in recent years (related in part to its former quota share agreement with a U.K. affiliate, which was novated in the fourth quarter of 2010), poor underwriting and operating results in 2011 and 2012 related to the 2011 Tohoku earthquake and the future role of AIUI within the AIG enterprise. The outlook reflects these offsetting factors.

Historically, A.M. Best has considered parental support and financial flexibility when evaluating AIG’s property/casualty subsidiaries. While there is no specific consideration of those factors in the current ratings of the companies, AIG has continued to strengthen its balance sheet through the sale of non-core businesses, has negotiated improved terms for its syndicated bank credit facilities and its financial flexibility has been improved by the sale of the U.S. Treasury’s common equity position in the company.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following companies, which are collectively referred to as the Chartis U.S. Insurance Group:
  • National Union Fire Insurance Company of Pennsylvania
  • The American Home Assurance Company
  • Commerce and Industry Insurance Company
  • Chartis Property Casualty Company
  • Insurance Company of the State of Pennsylvania
  • New Hampshire Insurance Company
  • Chartis Insurance Company - Puerto Rico
  • Chartis Insurance Company of Canada
  • Chartis Casualty Company
  • Granite State Insurance Company
  • Illinois National Insurance Company

The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following companies, which are collectively referred to as the Lexington Insurance Pool:
  • Lexington Insurance Company
  • Chartis Specialty Insurance Company
  • Chartis Excess Limited

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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “The Treatment of Terrorism Risk in the Rating Evaluation”; “Rating Natural Catastrophe Bonds”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating New Company Formations.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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