A.M. 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, A.M. Best has
affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit
Ratings (Long-Term IR) of American Financial Group, Inc. (AFG)
(Cincinnati, OH) [NYSE/NASDAQ: AFG]. The outlook of these Credit
Ratings (ratings) is stable.
Concurrently, A.M. Best has upgraded the Long-Term ICRs to “a+”
from “a” and affirmed the FSR of A (Excellent) of the
property/casualty (P/C) members of the Republic and Summit
Insurance Pool (collectively, Republic and Summit). The outlook for
the FSR has been revised to positive from stable while the outlook
for the Long-Term ICR remains positive. Two pool members – Republic
Indemnity Company of America and Republic Indemnity Company of
California – are headquartered in Encino, CA. The remaining members
– Bridgefield Employers Insurance Company and Bridgefield Casualty
Insurance Company (collectively, the Summit companies) – are
headquartered in Lakeland, FL.
A.M. Best also has upgraded the FSR to A+ (Superior) from A
(Excellent) and the Long-Term ICRs to “aa-” from “a+” 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, A.M. 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, A.M. 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, A.M. Best has affirmed the FSR of B++ (Good) and
the Long-Term ICR of “bbb+” of Manhattan National Life Insurance
Company (Manhattan National) (Cincinnati, OH), 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 A.M. 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 its balance sheet
strength, which A.M. Best categorizes as very strong, as well as
its 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 Long-Term ICR upgrades recognize the
pool’s continued smooth integration of the Summit companies, as
evidenced by the group’s steadily improved combined ratios and
overall profitability since the Summit companies were acquired. The
positive outlooks reflect the potential for further rating upgrades
over the next 12-24 months, should the group continue to generate
overall operating performance comparable to recent results while
maintaining the strongest level of risk-adjusted capitalization, as
measured by BCAR. Republic and Summit’s ratings otherwise 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 its business that
followed the addition of the Summit companies to the pool in
2014.
The ratings of National Interstate reflect its balance sheet
strength, which A.M. Best categorizes as strongest, 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 rating upgrades reflect enhanced
integration and shared resources with the broader AFG enterprise
now that National Interstate is fully owned by AFG. The ratings
otherwise reflect the group’s strong long-term operating
performance; risk-adjusted capitalization being at the strongest
level, as measured by BCAR, achieved through generally 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 (although
the 2014, 2015 and 2016 accident years have each developed
favorably) and the associated deterioration in underwriting results
in recent calendar years, although calendar year underwriting
results have improved in each of the past three years. National
Interstate’s ratings also consider its concentration of business
within the passenger and truck transportation industries.
The ratings of Mid-Continent’s reflect its balance sheet
strength, which A.M. Best categorizes as strongest, 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 strongest 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 and Florida, which exposes the operations to
elevated degrees of regulatory, legislative and competitive
risks.
The ratings of GALIC and AILIC reflect its balance sheet
strength, which A.M. Best categorizes as 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.
The life group maintains 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 and low reinsurance dependence. The
investment portfolio’s exposure to real estate-related investments,
particularly residential mortgage-backed securities, remains high
relative to its peers, with additional elevated exposure to
collateralized loan obligations as a percentage of total capital.
GALIC continues to generate strong earnings with increasing net
investment income, although it lacks some premium diversification
with a significant majority derived from annuities core lines of
business. Although the company has reported net realized losses on
a statutory basis over the past three years, a substantial portion
of these losses has been offset by an increase in its common stock
portfolio’s unrealized gain over the same time period.
GALIC and AILIC maintain a favorable and competitive market
leading position in major lines of annuity business with good
diversification in distribution channels and continued development
of products. These characteristics are offset by a business mix
that A.M. Best has on its product continuum at the high end of
risk. 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 A.M. 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.
Manhattan National has continued to report strong risk-adjusted
capitalization, offset by its declining premium and statutory
earnings trends. A.M. Best believes that the run-off block of
ordinary life business remaining at the company is no longer
central to the organization’s long-term strategy. Although the life
insurance line should continue to provide some revenue and earnings
diversification for AFG’s annuity operations, the contribution has
been steadily decreasing. Net investment income continues to
fluctuate due to lower invested assets and net yields.
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. A.M. Best expects that earnings and cash flows
from AFG’s operating subsidiaries will allow it to support
risk-adjusted capitalization, should the need arise. At the same
time, surplus growth at each group has been limited over the past
five years by the payment of significant stockholder dividends to
AFG. These dividends vary based on capital needs at the various
subsidiaries.
AFG’s debt-to-capital (excluding accumulated other comprehensive
income) and interest coverage ratios remain within A.M. 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.
For a complete list of American Financial Group, Inc.’s
subsidiaries’ FSRs, Long-Term ICRs and Long-Term IRs, please visit
American Financial Group, Inc.
This press release relates to Credit Ratings that have been
published on A.M. 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 A.M.
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 A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. 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 © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20180817005340/en/
A.M. BestGregory DickersonSenior Financial
Analyst-P/C+1 908 439 2200, ext.
5161gregory.dickerson@ambest.comorIgor
BassFinancial Analyst-L/H+1 908 439 2200, ext.
5109igor.bass@ambest.comorChristopher
SharkeyManager, Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyDirector, Public Relations+1 908 439 2200, ext.
5644james.peavy@ambest.com
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