Negative rating maintained on AIA

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26 July 2010

Research house Moody’s is maintaining its Aa3 rating (negative outlook) on AIA despite the appointment of a new CEO.

The Hong Kong-based insurer – which is expected to be listed on the Hong Kong Stock Exchange prior to a public float – has appointed former Prudential Group CEO Mark Tucker to replace Mark Wilson, who has only been AIA’s CEO since early last year.

Moody’s says Mr Tucker’s appointment will be beneficial to the company and will help the insurer achieve its Asian listing.

AIA’s parent AIG has said it will proceed with the listing as soon as possible with a float being tipped before the end of this year.

But Moody’s says AIA still has some way to go before it will change the negative rating.

“AIA’s negative rating outlook reflects potential business disruptions owing to the uncertainty over its strategic direction and ownership structure, which has been amplified by senior management turnover,” Moody’s said in a statement.

“We believe that the re-launch of the initial public offering is credit-positive. The plan increases clarity about the company's future ownership structure and represents a significant step toward independence from AIG.”

Moody’s says the rating could change if the float is completed successfully, premiums grow consistently and profitability is maintained.

But it notes markets are now more volatile than when AIG previously proposed to float its Asian operations and there is a risk it could withdraw plans to list AIA.

Moody’s also raised the possibility of talks to sell AIA to Prudential again, but with Mr Tucker’s appointment, there has also been speculation AIA could buy the British insurer’s Asian operations after a float.