MOODY'S UPGRADES RATINGS OF AMERICAN FINANCIAL GROUP INC. (SENIOR DEBT TO Baa2 FROM Baa3) RELATED RATINGS ALSO RECEIVE ONE NOTCH UPGRADE
New York, April 06, 1999 -- Moody's Investors Service has upgraded the senior debt rating of American Financial Group, Inc. (AFG) to Baa2 from Baa3. Moody's also upgraded, by one notch, the debt, preferred stock, and insurance financial strength ratings of various other members within the American Financial Group. The outlook for American Financial Group's ratings is stable.
According to Moody's, these rating actions reflect the group's increasing focus on its core businesses within the property/casualty division, which was accentuated by the sale of the group's volatile commercial lines division in late 1998. In addition, AFG has taken steps to moderate its financial leverage, simplify its organizational structure, and strengthen its investment portfolio with the divestiture of substantial investments in non-strategic businesses. The rating agency noted that these positives are attenuated by the group's still material debt and preferred security obligations and continuing intense competition in both the US property/casualty and annuity markets.
Expanding on its rating rationale, Moody's noted that AFG has developed a strong franchise in nonstandard auto, and that the breadth of its writings within its specialty operations division help to diversify the property/casualty earnings. Further, the group's annuity and life/health operations benefit from their niche position within the qualified and non-qualified tax-deferred annuity market, good asset quality, and stable earnings. These strengths are tempered by the financial leverage at the American Annuity Group, the lack of significant franchise and its relatively small scale in all business lines, as well as its interest rate risk -- primarily through exposure to mortgage-backed securities.
The following debt ratings were upgraded:
American Financial Group, Inc. -- senior debt to Baa2 from Baa3; senior debt shelf to (P)Baa2 from (P)Baa3; subordinated debt shelf to (P)Baa3 from (P)Ba1; preferred debt shelf to (P)"baa3" from (P)"ba1".
American Financial Corporation -- senior debt to Baa2 from Baa3.
American Premier Underwriters, Inc. -- subordinated debt to Baa3 from Ba1.
American Financial Capital Trust I -- preferred stock to "baa3" from "ba1".
AAG Holding Company, Inc. -- senior debt to Baa2 from Baa3; senior debt shelf to (P)Baa2 from (P)Baa3; subordinated debt to Baa3 from Ba1; junior subordinated debt to Ba1 from Ba2.
American Annuity Group Capital Trust I -- preferred stock to "baa3" from "ba1".
American Annuity Group Capital Trust II -- preferred stock to "baa3" from "ba1".
American Annuity Group Capital Trust III -- preferred stock to "baa2" from "baa3".
The following insurance financial strength ratings were upgraded:
Great American Insurance Company -- to A3 from Baa1.
Atlanta Casualty Company -- to A3 from Baa1.
Republic Indemnity Company of America -- to A3 from Baa1.
Great American Life Insurance Company -- to A3 from Baa1.
American Financial Group, Inc. is a holding company which, through its operating subsidiaries, is active in nonstandard automobile and specialty property and casualty insurance, as well as the sale of interest-sensitive tax-deferred annuities and certain life and supplemental insurance products. AFG reported consolidated assets of $15.8 billion and shareholder equity of $1.7 billion as of December 31, 1998. The firm is headquartered in Cincinnati, Ohio.
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