AIG will take two years to fix - Moody's

The new management at AIG needs a couple of years to create a stronger business, Moody’s says.

Moody’s is the latest organisation to voice its opinion on AIG, which had endured a difficult third quarter. 

AIG has raised eyebrows among investors and analysts after announcing a $836m reserve hike to tackle higher than expected claims in its commercial business.

Along with the expected losses from the hurricanes, AIG posted a $2.8bn pre-tax loss in the third quarter. 

Moody’s said there is much work for the new management - led by chief executive Brian Duperreault - to tackle.

The rating service said AIG is a market leader with a diverse global product suite.

However, these strengths must be tempered by ’the company’s record of volatile loss reserves and weak profits in P&C insurance, its above-average exposure to structured and alternative investments, and the complexity of risk management across its many business lines and countries/regions.’

”Given the scope of these changes, Moody’s expects it will take a couple of years for the P&C operations to demonstrate stronger, more stable results,” it added.

Moody’s said AIG is slowing money handed back to shareholders, reassigning key staff, revamping the reinsurance programme and creating greater reliance on individual account underwriting supported by technical tools.

Morgan Stanley believes the new management are ‘not afraid of cutting unprofitable business’ as they strive to improve underwriting performance and risk exposure. 

Moody gave a Baa1 rating to $400 million of AIG bonds.