AM Best has affirmed the Financial Strength Rating (FSR)
of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “aa-” of Great American Insurance Company and its pooling
affiliates, collectively referred to as Great American Insurance
Companies (Great American). Concurrently, AM Best has affirmed the
Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings
(Long-Term IRs) of American Financial Group, Inc. (AFG)
(Cincinnati, OH) [NYSE: AFG]. The outlook of these Credit Ratings
(ratings) is stable.
Concurrently, AM Best has affirmed the FSR of A (Excellent) and
the Long-Term ICR of “a+” of the property/casualty (P/C) members of
the Republic and Summit Insurance Pool (collectively, Republic and
Summit). The outlook of these ratings remains positive. Two pool
members — Republic Indemnity Company of America and Republic
Indemnity Company of California — are domiciled in Encino, CA. The
remaining members – Bridgefield Employers Insurance Company and
Bridgefield Casualty Insurance Company (collectively, the Summit
companies) – are domiciled in Lakeland, FL.
AM Best also has affirmed the FSR of A+ (Superior) and the
Long-Term ICRs of “aa-” of National Interstate Insurance Company
(headquartered in Richfield, OH) and its affiliates (collectively
referred to as National Interstate). The outlook of these ratings
is stable.
In addition, AM Best has affirmed the FSR of A+ (Superior) and
the Long-Term ICRs of “aa-” of the P/C members of the Mid-Continent
Group (Mid-Continent) (headquartered in Tulsa, OK). The outlook of
these ratings is stable.
At the same time, AM Best has affirmed the FSR of A (Excellent)
and the Long-Term ICRs of “a+” of Great American Life Insurance
Company (GALIC) and its wholly owned subsidiary, Annuity Investors
Life Insurance Company (AILIC), the key annuity subsidiaries of
AFG. The outlook of these ratings is stable.
Furthermore, AM Best has affirmed the FSR of B++ (Good) and the
Long-Term ICR of “bbb+” of Manhattan National Life Insurance
Company (Manhattan National), a life subsidiary of AFG. The outlook
of these ratings is stable.
All companies are subsidiaries of AFG and headquartered in
Cincinnati, OH, unless otherwise specified. (Please see link below
for a detailed listing of the P/C and life and annuity companies
and ratings).
The ratings of Great American reflect its balance sheet
strength, which AM Best categorizes as strongest, as well as its
strong operating performance, favorable business profile and
appropriate enterprise risk management (ERM).
Great American’s ratings consider the group’s balance sheet
strength, which reflects its risk-adjusted capitalization being at
the strongest level, as measured by Best’s Capital Adequacy Ratio
(BCAR), and the quality of its investments and reinsurance,
consistently strong operating profitability, which has been
sustained over the long term, and diversified business profile,
which serves to protect its earnings stream. Great American’s
strong operating performance reflects the profitable underwriting
results derived through management’s disciplined operating strategy
and specialty market knowledge, as well as the group’s multiple
distribution channels, diversified product offerings, broad
geographic spread of risk and access to data through its
sophisticated technology platform.
These positive rating factors are somewhat offset by elevated
investment in certain higher risk asset classes and by adverse
prior-year loss reserve development occurring in certain lines of
business, particularly relating to the run-off of its asbestos and
environmental claims.
The ratings of Republic and Summit reflect their balance sheet
strength, which AM Best categorizes as very strong, as well as
their strong operating performance, neutral business profile and
appropriate ERM. The ratings of the members of Republic and Summit
also reflect ratings lift from the lead rating unit, Great
American, based on implicit and explicit support.
Republic and Summit’s ratings reflect the pool’s sustained
strong operating performance on an absolute basis and relative to
the results of similarly rated peers within the workers’
compensation composite, while maintaining very strong balance sheet
strength through its strongest level of risk-adjusted
capitalization, favorable development of prior years’ loss reserves
and a solid investment portfolio. Republic and Summit also benefits
from the expanded geographic diversification of their business that
followed the addition of the Summit companies to the pool in 2014.
Partially offsetting these positive rating factors is the lack of
surplus appreciation over the past three years due significant
stockholder dividends to AFG.
The positive outlooks reflect the potential for further rating
upgrades over the next 12-24 months, should the group’s surplus
appreciate while continuing to generate overall operating
performance comparable to recent results and maintaining the
strongest level of risk-adjusted capitalization, as measured by
BCAR.
The ratings of National Interstate reflect its balance sheet
strength, which AM Best categorizes as very strong, as well as its
strong operating performance, neutral business profile and
appropriate ERM. The ratings also reflect lift from the lead rating
unit, Great American, based on implicit and explicit support.
National Interstate’s ratings reflect the group’s strong
long-term operating performance; risk-adjusted capitalization that
measures at the very strong level, as measured by BCAR, which is
achieved through profitable underwriting results and demonstrated
expertise within its niche transportation market. In addition, the
ratings acknowledge the group’s experienced management team and
conservative operating philosophy. The positive rating attributes
are derived from management’s focus on maintaining rate integrity,
controlled claims handling and detailed segmentation of risks that
are supported by effective technology resources. Additionally,
National Interstate’s focus on providing alternative risk transfer
programs for the specialty transportation segment provides the
group with a sustainable competitive advantage, particularly in
terms of pricing, claims adjusting and loss control.
Partially offsetting these positive rating factors are adverse
development of some recent calendar year loss reserves and the
associated impact on underwriting results in recent calendar years.
However, calendar year underwriting results have been trending in a
favorable direction. National Interstate’s ratings also consider
its concentration of business within the passenger and truck
transportation industries.
The ratings of Mid-Continent reflect its balance sheet strength,
which AM Best categorizes as very strong, as well as its strong
operating performance, neutral business profile and appropriate
ERM. The ratings also reflect ratings lift from the lead rating
unit, Great American, recognizing the historical support provided
by ultimate parent AFG to Mid-Continent.
Mid-Continent’s ratings consider its balance sheet strength,
which is supported by risk-adjusted capitalization that measures in
the very strong category, favorable investment portfolio and a high
quality reinsurance panel. The balance sheet strength has benefited
from favorable operating performance sustained over the long term
and successful position within its targeted markets. The group’s
favorable underwriting and operating results reflect management’s
proven product knowledge and commitment to maintaining accurate
pricing. These positive rating factors are offset partially by
adverse prior year loss reserve development in recent years arising
from the product liability line of business, which has pressured
underwriting results for the past several years. Additional
offsetting factors include the group’s relatively limited
geographic spread of business with the majority of it derived from
Texas, Oklahoma, Kansas and Florida, which exposes the operations
to elevated degrees of regulatory, legislative and competitive
risks.
The ratings of GALIC and AILIC reflect their balance sheet
strength, which AM Best categorizes as strong, as well as their
strong operating performance, neutral business profile and
appropriate ERM. The ratings also reflect lift from the lead rating
unit, Great American, based on continued implicit and explicit
support. The life group continues to maintain strong risk-adjusted
capitalization, as measured by BCAR, along with strong liquidity
and financial flexibility. The group also maintains a positive
quality of capital with low financial leverage. Investment quality
remains high; however, GALIC has a higher concentration in Schedule
BA assets and structured securities than industry benchmarks. GALIC
continues to generate strong earnings with increasing net
investment income, although it lacks premium diversification with a
concentration within individual fixed and fixed indexed
annuities.
GALIC and AILIC maintain a favorable and competitive market
position in the individual annuity business with good
diversification in distribution channels and continued development
of products. These characteristics are offset by concentration
within its financial distribution channel. Annuity surrenders as a
percentage of reserves were higher than the previous year, and AM
Best believes the company will continue to be pressured in the
current low interest rate environment on maintaining adequate
spreads on its business. Additionally, strong growth in the annuity
business over the past several years has helped GALIC and AILIC
become material contributors to AFG’s consolidated revenue and
earnings.
Manhattan National’s ratings reflect its balance sheet strength,
which AM Best categorizes as strong, as well as its marginal
operating performance, limited business profile and appropriate
ERM. The ratings also recognize the strength and support of
AFG.
Each of the groups discussed above also benefits from the
financial flexibility provided by AFG, which maintains financial
leverage that is in line with its current ratings, as well as
additional liquidity sources given its access to capital markets
and line of credit. AM Best expects that earnings and cash flows
from AFG’s operating subsidiaries will allow it to support
risk-adjusted capitalization, should the need arise.
AFG’s debt-to-capital (excluding accumulated other comprehensive
income) and interest coverage ratios remain within AM Best’s
guidelines for its current ratings. AFG maintains sound liquidity
and access to a revolving credit facility. AFG has no material debt
maturing until 2026, further benefiting its liquidity position. AFG
relies on stockholder dividends from its subsidiaries to fund
interest expenses, repurchase company stock, redeem debt,
reallocate capital to support its operating entities and for other
corporate purposes. Nonetheless, management remains committed to
maintaining capital at the rated entities at levels commensurate
with their ratings.
A complete listing of American Financial Group, Inc.’s
subsidiaries’ FSRs, Long-Term ICRs and Long-Term IRs is also
available.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media use of
Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190911005773/en/
Elizabeth Blamble Senior Financial Analyst—P/C
+1 908 439 2200, ext. 5603 elizabeth.blamble@ambest.com
Igor Bass Financial Analyst—L/H +1 908 439
2200, ext. 5109 igor.bass@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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