A.M. Best Assigns Initial Debt Ratings for American Financial Group; Affirms Financial Strength Ratings of Subsidiaries.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--June 18, 2002 A.M. Best Co. has assigned initial debt ratings to the existing debt of the American Financial Group, Inc. (AFG AFG Afghanistan (international vehicle registration) AFG American Financial Group AFG Assistance to Firefighters Grant AFG Arbeitsförderungsgesetz (German: Labor Advancement Law) AFG Accreditation for Growth ) (NYSE NYSE See: New York Stock Exchange : AFG), Cincinnati, Ohio “Cincinnati” redirects here. For other uses, see Cincinnati (disambiguation). Cincinnati is a city in the U.S. state of Ohio and the county seat of Hamilton County. , which includes the assignment of a "bbb" to American Financial Group, Inc.'s senior debentures. Further, A.M. Best has extended indicative ratings of "bbb" senior debt, "bbb-" subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , and "bbb-" trust preferred to American Financial Group's existing $340 million shelf registration. In addition, A.M. Best has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the Excellent financial strength ratings for the majority of the property/casualty and life/health subsidiaries of AFG. A.M. Best also raised the financial strength ratings for the remaining property/casualty subsidiaries. The rating actions reflect AFG's strong capitalization and historically favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before . Capitalization is driven by AFG's generally sound loss reserving practices, moderate underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. leverage and quality investment portfolio, which is partially offset by equity investments in affiliate entities--which are typically viewed as less liquid. Although 2001 earnings were adversely impacted by losses related to September 11, the strengthening of asbestos and environmental reserves, unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. and the write down of impaired assets Impaired Asset An asset with a market value that is worth less than its book value. Notes: If the sum of all estimated future cash flows is less than the carrying value of the asset, then the asset would be considered impaired and would have to be written down to its fair , operating earnings have been favorable over the last five years, driven by the life and annuity segment. These results are reflective of management's disciplined operating style, product knowledge, strong technology platform, multiple distribution channels and diversified product offerings. Moreover, AFG benefits from a consistent and stable management team with extensive insurance experience and resources. The ratings also consider AFG's favorable market presence as one of the top 25 domestic property/casualty groups. The ratings also consider AFG's historically high financial leverage and low fixed coverage ratios. A.M. Best does not anticipate a significant reduction in financial leverage, thereby placing greater emphasis on insurance subsidiaries to generate sustainable earnings and cash flows for debt service. AFG has also recorded volatile total returns, attributable to substantial capital losses from the affiliated equity portfolio and the aforementioned events in 2001. However, following the permanent write down of impaired assets in recent years, primarily from the group's affiliated investment in Chiquita, future investment losses should be limited. In a separate rating action, A.M. Best has raised the rating of some auto subsidiaries and created a new group, Specialty Auto Group, which has been assigned an A (Excellent) financial strength rating. For more information, please refer to the June 17 press release titled, "A.M. Best Raises Ratings and Assigns New Group Rating to the Specialty Auto Companies of American Financial Group." A.M. Best views the rating outlook for the subsidiaries as stable or positive due to AFG's continued strong capital position, historically favorable earnings and improving specialty lines market conditions. For a complete listing of American Financial Group's debt and financial strength ratings, please visit http://www.ambest.com/press/americanfinancial.pdf. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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