A.M. Best Affirms Ratings for AIG’s Domestic Commercial P/C Companies

February 4, 2003

A.M. Best Co. has affirmed the financial strength ratings of A++ (Superior) relating to the American International Group (AIG) (New York), which comprises the domestic commercial property/casualty companies.

The rating affirmations follow a recent announcement by the group’s parent, American International Group, Inc. stating it will record a $2.8 billion pre-tax charge – after reinsurance – in the fourth quarter to increase its loss reserve provision primarily for excess casualty and directors’ & officers’ lines of business.

The reserve increase relates to accident years 1997 through 2001 and is attributed to a significant deterioration in loss cost trends. Nonetheless, the rating affirmations reflect AIG’s sustainable superior earnings performance, derived from its adherence to underwriting discipline and recognized leadership position within selected property/casualty market segments.

While AIG maintains the financial resources and flexibility to support the capital needs of its core business operations, A.M. Best has some concern with regard to the group’s stacked capital structure and its effect on individual companies within the group. A.M. Best intends to meet with management over the near term to review the group’s capital structure, its effect on individual companies within the group and the allocation of capital to support individual operating entities.

All remaining AIG financial strength ratings are unaffected.

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