Moody’s has affirmed the A2 insurance financial strength ratings of AIG’s Asia-Pacific subsidiaries, including AIG Australia.

The other subsidiaries are AIG Asia-Pacific Insurance, AIG Korea, AIG Insurance Company China and AIG Insurance Hong Kong.

AIG Taiwan Insurance was excluded from the ratings review because the parent has announced its intention to sell it to Nan Shan Life Insurance.

Moody’s says the affirmation – with a stable outlook – reflects the subsidiaries’ “sound business profiles and capitalisation” following their reorganisation and restructure in recent years.

The ratings agency “expects these entities to continue improving profitability and maintaining solid capitalisation”, its report says.

“The alignment of these ratings at A2 reflects regional co-ordination among the [Asia-Pacific] operations, as well as the benefits of being part of the property and casualty business of AIG.”

The ratings are one notch below the A1 and stable rating on AIG’s leading US and European property and casualty insurance companies, “reflecting [Asia-Pacific’s] modest share of the global business, as well as the limited size of individual… country operations relative to AIG as a whole”.

Moody’s says AIG Australia’s rating is based on the company’s leading position in commercial insurance for corporate accounts.

“AIG Australia has strong capitalisation and a conservative investment portfolio. The company also has good prospects for growth in the commercial property line.

“These strengths are offset by the company’s modest overall market position in Australia, whose property and casualty market is highly concentrated.

“In addition, the firm’s gross underwriting results have been, and will likely remain, volatile because it focuses on larger commercial risks, rather than small-dollar personal lines.

“Nonetheless, the net results in Australia are supported by inter-company reinsurance treaties, which were strengthened [last year]. Because of the competitive nature of the Australian property and casualty market, we expect underwriting margins will be constrained.”