A.M. Best Co. has affirmed the financial strength ratings of A
(Excellent) and issuer credit ratings (ICR) of "a" of Chartis US
Insurance Group and its members (Chartis US) and the Lexington
Insurance Pool and its members (Lexington), headquartered in Boston,
MA. The outlook for these ratings has been revised to stable from
negative. (See list below for member details.)
A.M. Best also has affirmed the FSR of A (Excellent) and ICR of "a" of AIU
Insurance Company (AIU). The outlook for these ratings
remains negative.
Concurrently, A.M. Best has affirmed the FSR of B+ (Good) and ICR of
"bbb-" of American General Property Insurance Company (AGPIC)
(headquartered in Houston, Texas). The outlook for these ratings has
been revised to stable from negative.
In addition, A.M. Best has withdrawn the FSRs of A (Excellent) and ICRs
of "a" of Chartis Select Insurance Company and Landmark
Insurance Company, due to the merger of these companies with and
into their immediate parents, Lexington Insurance Company and National
Union Insurance Company of Pittsburgh, Pa., respectively.
All companies are subsidiaries of American International Group, Inc.
(AIG) (New York, NY) (NYSE: AIG). Unless otherwise noted, all companies
are headquartered in New York, NY.
The ratings of Chartis US reflect its supportive level of risk-adjusted
capitalization, the group's leadership position in the global
property/casualty market, the successful implementation of Chartis'
rebranding, the effect of new leadership on management's approach to the
business, and its favorable earnings prospects in light of the
financial, cultural and operational initiatives put in place since 2010.
Offsetting these positive factors are the effect of soft market
conditions on underwriting results, A.M. Best's expectation of continued
emergence of adverse development of prior years' loss reserves and the
group's exposure to natural and man-made catastrophe events which,
although diminished by recent underwriting actions, remains a
significant contributor to underwriting variability.
The stable outlook reflects Chartis US' market position; its ability to
lead, attract and retain clients by leveraging its significant global
capacity, extensive product offerings and innovation; and greater
emphasis on technical pricing and predictive modeling. While reserve
development remains a concern, the stable outlook suggests that any
future reserve development will be within a level acceptable to A.M.
Best. A.M. Best also expects that the group will continue to maintain a
supportive level of risk-adjusted capitalization through favorable net
earnings while providing shareholder dividends to its parent in
accordance with historical norms. The change in outlook to stable from
negative also considers the continued improvements at AIG including the
January 2011 implementation of the company's recapitalization plan,
AIG's recent issuance of debt and equity in the public capital markets,
enhanced holding company liquidity and the orderly wind down of its
financial products division. (Please refer to today's press release
titled, "A.M. Best Revises Outlook to Stable for American International
Group, Inc. and Most of Its U.S. Insurance Subsidiaries" for details.)
Chartis US' risk-adjusted capital position remained stable in 2011 and
is well-supportive of the ratings at its current level. A decline in
affiliated investments in recent years has served to improve both the
level and quality of risk-adjusted capital, as have actions to reduce
the group's exposure to natural catastrophes. Surplus declined in 2011,
primarily due to underwriting losses driven by catastrophes and by
payment by the group members of shareholder dividends in line with
historical levels. A.M. Best anticipates that future dividends will be
taken in accordance with AIG's strategy of maintaining more capital at
the holding company level, which affords a greater level of flexibility
to deploy resources throughout the enterprise. At the same time, A.M.
Best expects that capital will be maintained at a sufficient level to
support the ratings at the operating entities.