A.M. Best Affirms Ratings of AIG Europe Limited

  A.M. Best Affirms Ratings of AIG Europe Limited

Business Wire

LONDON -- January 25, 2013

A.M. Best Europe – Rating Services Limited has affirmed the financial strength
rating of A (Excellent) and issuer credit ratings of “a” of AIG Europe Limited
(AEL) (United Kingdom), formerly Chartis Europe Limited. The outlook assigned
to both ratings is stable. AEL is a wholly owned subsidiary of American
International Group, Inc. (AIG) (New York).

The ratings reflect AEL’s excellent risk-adjusted capitalisation, good
operating performance and good business profile, which is supported by
excellent distribution capabilities across Europe. Previous concerns regarding
weaker underwriting results in recent years and the impact of the economic
downturn on prospective results have been partly mitigated by the actions
management has taken to address the underperformance of particular lines of
business.

On 1 December 2012, AIG completed the restructuring of its European operations
by merging Chartis Europe S.A. (France) into AEL. AEL is now 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, the
introduction of revised underwriting guidelines and the refocus of the
professional indemnity account away from recession exposed professions, a
modest improvement in combined technical performance was achieved in 2011,
with higher catastrophe losses offset by better results for casualty,
specialty, financial lines and consumer business. A further improvement is
expected to be reported for 2012, reflecting lower catastrophe losses and the
benefits of the first stages of the restructuring of the European operations,
and is likely to continue into 2013 following the completion of the
restructuring.

However, with premium rates remaining weak for many of AEL’s core lines of
business, prospective performance continues to be subject to considerable
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. Key criteria utilised include: “Rating Members of Insurance Groups”;
“Risk Management and the Rating Process for Insurance Companies”; “Catastrophe
Analysis in A.M. Best Ratings”; “Understanding BCAR for Property/Casualty
Insurers”; and “Understanding Universal BCAR”. 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.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. 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.

Contact:

A.M. Best Europe – Rating Services Limited
David Drummond
Senior Financial Analyst
+(44) 20 7397 0327
david.drummond@ambest.com
or
Catherine Thomas
Director, Analytics
+(44) 20 7397 0281
catherine.thomas@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com