Rating agency Standard & Poor’s (S&P) has assigned a credit and financial strength rating of ‘A’ to Bermuda-based American International Reinsurance Company (AIRCO) — a subsidiary of AIG Property Casualty Group, which is ultimately owned by AIG.The agency said it based the rating on the company’s strong capital underscored by strong underwriting performance. The stable outlook, S&P says, reflects its outlook on the AIG Property Casualty Group, which it views as strategically important to the ultimate parent, AIG.“The ratings reflect the core status of AIRCO to the AIG Property Casualty Group (which is ultimately owned by AIG — we rate the group’s core operating companies ‘A/Stable’) through the company’s significant assumptions of the group’s core Japanese operations and management’s commitment to strengthening AIRCO’s balance sheet through a combination of commutation, retrocession and loss portfolio transfer with other AIG property/casualty affiliates.” S&P said in a statement.“AIRCO’s operations in lines of business integral to the overall group’s strategy, the brand name, management’s commitment to strengthen balance sheet and common sharing of the global infrastructure and system all help support its status as a core operation for the group.“AIRCO is strongly capitalised with a capital redundancy above the rating level based on the Standard & Poor’s capital model. As of August 31, 2012, statutory capital and surplus totalled $835 million, up form $668 million in 2011.”“AIRCO has strong operating performance as measured by its net combined ratio and return on revenue (ROR); in 2011, the combined ratio was 94.7 percent and ROR was 9.3 percent, compared with 91.8 and 14.4 respectively, in 2010. Over the past five years, the average combined ratio and ROR were 90.5 percent and 20.1 percent respectively. As of August 31, 2012, the company generated a combined ratio of 84.2 percent and an underwriting performance in the long run (combined ratio at or below 98 percent and ROR above 15 percent) commensurate with the rating.“Despite the strong underwriting performance, we believe the company is susceptible to earnings volatility arising from its excess-of-loss casualty business, as shown by its 2008 and 2009 underwriting results as measured before commutation (before commutation, the loss ratio reached as high as 110 percent in 2008).”