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Moody's upgrades AIA Group, units

Moody's upgraded the ratings of AIA Group Ltd. and its units because of the insurer's strong financial profile, earnings track record and robust capitalization.

The rating agency said March 27 that it raised the issuer rating and the senior unsecured debt ratings of the Hong Kong-based insurer to A2 from A3. At the same time, the rating agency upgraded the insurance financial strength ratings of AIA Co. Ltd. and AIA International Ltd. to Aa2 from Aa3.

The ratings outlook is stable.

Moody's said AIA's financial flexibility is backed by its access to the capital markets and low level of financial leverage. Other strengths of the insurer include its adherence to a prudent financial policy and offering of low-risk products. The rating agency expects the insurer to sustain its financial profile.

AIA's debt ratings could be raised if there was an increase in liquid holding company investments, which account for more than 75% of its outstanding debt, or if the group reorganizes itself into a more de-stacked structure so dividends from all its subsidiaries could flow to the group rather than from AIA Co. only.

An upgrade is unlikely for AIA Co. and AIA International in the near term as their insurance financial strength ratings are already at a very high level. However, if there is a significant improvement in the operating environments and sovereign ratings of less-developed markets, their ratings could be further upgraded.

Conversely, the group's ratings could be downgraded if there was a significant change in its strategy and financial policy following management changes, its capital and profitability decrease significantly, and if the group engages in acquisitions that could potentially increase its exposure to less-developed markets.