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Business as usual as AIG South Africa grows annual profits 32%

03 March 2009 AIG South Africa

American International Group, Inc. (“AIG Inc.”) New York today announced a 4th quarter loss of $61.7 bn. The company also announced a broad set of actions, taken in co-operation with the US Department of Treasury and the Federal Reserve of New York (“Federal Reserve”), to improve AIG’s capital structure, protect and enhance the value of its key businesses, and position these franchises for the future as more independently run, transparent companies. These actions include:

· A new five year equity capital facility of $30 billion

· The repayment of the Federal Reserve credit facility of $26 billion via the transfer to the Federal Reserve of preferred interests in American Life Insurance Company and American International Assurance Company, Ltd.

· The transfer of securitisation notes up to $8.5 billion of certain of its US life insurance businesses in return for a further reduction in the credit facility

AIG Inc. also announced that it intends to form a General Insurance Holding Company, also known as AIU which will include the Foreign General Insurance operations incorporating AIG South Africa Ltd. and AIG Life South Africa Ltd. The newly formed entity will be called AIU Holdings, Inc with a board of directors, management team and brand distinct and separate from AIG Inc.

AIU said its insurance operations grew a credible 10.3% for the year ended 2008 with excellent underwriting results considering prevailing market conditions, including a profit of US$1 billion at a combined ratio of 92.5%.
 
AIG South Africa Limited and AIG Life South Africa limited combined posted a profit after tax of R179,6m, a 32% increase on 2007. These businesses have historically delivered consistent, profitable results.

AIG South Africa’s companies credit ratings remain at AAA which is the highest local rating available. Fitch Ratings and Global Credit Ratings affirmed the respective ratings today. 

Peter Flint, President and CEO of AIG Africa including the AIG South African operations which have been operating in the country for 46 years, said: “For AIG in South Africa it remains business as usual; we are in a very strong financial position and continue to pay claims and underwrite new business. AIG Inc.’s challenges in the United States are localised and despite headline attention are not impacting our operations here.”

“We remain tightly regulated and we are required by local law to maintain specific levels of solvency in order to maintain trading licenses,” said Flint.

The solvency margin for AIG South Africa Ltd. is 58% compared to a statutory requirement of 15%, while the capital adequacy ratio (CAR) for AIG Life South Africa is 8.7 times compared with a minimum statutory requirement of 2 times.

AIG’s local operations are highly regulated by South African insurance regulators and the assets and capital base of AIG South Africa Limited and AIG Life South Africa are protected and cannot be accessed by AIG Inc.
 
The AIG South Africa companies are wholly owned subsidiaries of American International Underwriters Overseas Limited, a member of the Foreign General Insurance operations which are AIG’s International insurance operations and as announced today, will be incorporated under the newly separated entity, AIU Holdings Inc. 

 

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