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TEXT - S&P rates American International Reinsurance
January 14, 2013 / 3:56 PM / 5 years ago

TEXT - S&P rates American International Reinsurance

(The following statement was released by the rating agency)
    
Overview
     -- American International Reinsurance Co. (AIRCO), a core subsidiary of 
AIG Property Casualty Group, which is ultimately owned by American 
International Group Inc. (AIG), has strong capital underscored by strong 
underwriting performance.
     -- We are assigning our 'A' counterparty credit and financial strength 
ratings to AIRCO with a stable outlook.
     -- The stable outlook reflects our outlook on the AIG Property Casualty 
Group, which we view as strategically important to the ultimate parent AIG.

Rating Action
On Jan. 14, 2013, Standard & Poor's Services assigned its long-term 'A' 
counterparty credit and financial strength ratings to Bermuda-based American 
International Reinsurance Co. Ltd. (AIRCO). The outlook is stable.

Rationale
The ratings reflect the core status of AIRCO to the AIG Property Casualty 
Group (which is ultimately owned by AIG--we rate the group's core operating 
companies 'A/Stable') through the company's significant assumptions of the 
group's core Japanese operations and management's commitment to strengthening 
AIRCO's balance sheet through a combination of commutation, retrocession, and 
loss portfolio transfer with other AIG property/casualty affiliates.

AIRCO's operations in lines of business integral to the overall group's 
strategy, the brand name, management's commitment to strengthen balance sheet, 
and common sharing of the global infrastructure and system all help support 
its status as a core operation for the group.

AIRCO's core status reflects its operation acting as an internal reinsurer to 
the group's core Japanese operations. AIRCO's well-diversified product and 
client mix reflect that of AIG Property Casualty's core overseas operations. 
AIRCO's line of business mainly comprises: accident and health (49%), personal 
auto (34%), casualty (10%), and property (2%).

AIRCO is strongly capitalized with a capital redundancy above the rating level 
based on the Standard & Poor's capital model. As of Aug. 31, 2012, statutory 
capital and surplus totaled $835 million, up from $668 million in 2011.

AIRCO has strong operating performance as measured by its net combined ratio 
and return on revenue (ROR); in 2011, the combined ratio was 94.7% and ROR was 
9.3%, compared with 91.8% and 14.4%, respectively, in 2010. Over the past five 
years, the average combined ratio and ROR were 90.5% and 20.1%, respectively. 
As of Aug. 31, 2012, the company generated a combined ratio of 84.2% and an 
ROR of 24.7%. We believe AIRCO will continue to generate consistent 
underwriting performance in the long run (combined ratio at or below 98% and 
ROR above 15%) commensurate with the rating. Despite the strong underwriting 
performance, we believe the company is susceptible to earnings volatility 
arising from its excess-of-loss casualty business, as shown by its 2008 and 
2009 underwriting results as measured before commutation (before commutation, 
the loss ratio reached as high as 110% in 2008).

Established in 1981, AIRCO is an indirect subsidiary of AIG Property Casualty 
Group, which is ultimately and wholly owned by AIG (A-/Negative/A-2). AIRCO 
used to have significant life insurance and reinsurance operations, but it 
divested all of its life subsidiaries, unwound its reinsurance operations, and 
commuted a large block of its excess casualty business by early 2012. The only 
remaining life business is in the run-off annuities provided for its internal 
employees.

Outlook
The stable outlook reflects our outlook on the AIG Property Casualty Group, 
which we view as strategically important to the ultimate parent AIG. We could 
lower our ratings if operating performance deteriorates and falls short of our 
expectations due to a material adverse reserve development or an investment 
loss that could cause capitalization to decline below the 'A' level. On the 
other hand, we could raise the ratings if operating performance materially 
improves and consistently outperforms similarly rated peers, while continuing 
to improve its overall financial profile and enterprise risk management.

Our counterparty and financial strength ratings on AIRCO are at the same as 
our ratings on AIG Property Casualty Group. If we upgrade AIG Property 
Casualty Group, we may take similar action regarding AIRCO, provided our view 
of AIRCO's status within AIG Property Casualty Group remains unchanged.

Related Criteria And Research
     -- Full Analysis: Chartis Group, May 18, 2012
     -- Group Methodology, April 22, 2009

Ratings List
New Rating; Outlook Assigned

American International Reinsurance Co. Ltd.
 Counterparty Credit Rating
  Local Currency                        A/Stable/--
 Financial Strength Rating
  Local Currency                        A/Stable/--

 (Caryn Trokie, New York Ratings Unit)

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