Wed, Oct 08, 2008 - Page 11 News List

Moody’s Investors downgrades rating for AIG subsidiary

By Joyce Huang  /  STAFF REPORTER

Moody’s Investors Service yesterday lowered its insurance financial strength (IFS) rating for AIG General Insurance (Taiwan) Co (AIGGI Taiwan, 友邦產險), formerly known as Central Insurance Co (中央產險), to A3 from A1, to match its downgrade of the local life insurer’s parent, American International Group Inc (AIG).

“The rating change reflects that, given capital and liquidity strains at AIG, the level of its support to AIGGI Taiwan has weakened and hence the previous two-notch upgrade of the stand-alone rating was no longer warranted,” Sally Yim (嚴溢敏), a lead Moody’s analyst, said in a press statement.

“The A3 IFS rating now represents the stand-alone financial strength of AIGGI Taiwan,” she said.

Last month, AIGGI Taiwan announced efforts to improve its profitability, including the closure of 28 of 47 branches and staff cuts. It will also reduce sales of motor insurance through car dealers — which have charged relatively high commissions — while boosting motor insurance sales through life insurance agents at its affiliate, Nan Shan Life (南山人壽).

“There is an execution risk surrounding this new distribution strategy,” Moody’s said in the statement.

Moody’s said it would monitor the company’s progress in improving profitability. AIGGI Taiwan reported a net loss of NT$253.8 million (US$7.83 million) in the first half of the year.

“If it fails to lower its combined ratio below 100 percent [to earn more than it pays out on insurance policies] over the next 12 months,” Moody’s may lower its rating again, Yim said.

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