American Fincl Subsids Outlk to Pos;Rtgs Afrmd by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/3/97 -- Standard & Poor's today revised its ratings outlook on 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 ) subsidiaries American Financial Corp., American Premier Underwriters, Inc., and American Annuity Group, Inc. to positive from stable. The ratings on AFG and related subsidiaries were 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. (see list below). Approximately $394 million of consolidated debt is affected. The outlook change reflects expectations that capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of the consolidated insurance operations, as measured by Standard & Poor's capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. , will improve to approximately 125% by year-end 1997. Other factors supporting the ratings include the group's conservative financial leverage (debt to capital ratio), strong coverage ratios, and diverse mix of profitable businesses. AFG is a diversified publicly held holding company with select operations in the non-standard auto, specialty commercial, and tax-deferred annuity tax-deferred annuity See tax-sheltered annuity (TSA). and life insurance markets. The company's principal shareholder, the Lindner family, owns approximately 44% of all outstanding stock and is primarily responsible for centralizing cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. corporate policy among its various subsidiaries on issues such as capital allocation, reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , and investments. Since the "merger" in April 1995, management has taken significant actions to reduce financial leverage below its target level of 25%. As of June 30, 1997, AFG's consolidated debt to capital ratio was 21.7%, versus 21.8% at year-end 1996, which Standard & Poor's believes is conservative for this rating. Similarly, debt plus preferred as a percentage of total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. was 38.2% in the first six months of 1997, versus 36.0% at year-end 1996. As a result, coverage ratios will continue to remain strong at approximately 9.7 times (x) and 5.0x for statutory interest and fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making , respectively. Historically, the ratings of the various holding companies have been somewhat limited by the capitalization of the insurance operations, which until recently was barely adequate under Standard & Poor's capital adequacy ratio. However, Standard & Poor's expects management to take actions that will help strengthen capitalization at the various operating companies operating company A business that engages in transactions with outsiders. in the near term. OUTLOOK: POSITIVE Standard & Poor's expects consolidated debt to capital ratios to remain close to 25%. At the same time, preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. outstanding is expected to remain at approximately 15% of total capitalization. Statutory fixed-charge cash coverage from consolidated subsidiary operations should remain close to 5.0x as management continues to take actions that reflect positively on future coverage ratios. Finally, capitalization as measured by Standard & Poor's capital adequacy ratio is expected to reach approximately 125% by year-end 1997. -- CreditWire RATINGS AFFIRMED American Financial Group, Inc. Rule 415 mixed-use shelf (prelim) BBB/BBB-/BBB- American Financial Capital Trust I Trust Originated Preferred Shares BBB- (gtd: American Financial Group, Inc.) American Financial Corp. Issuer credit rating BBB Senior debt rating BBB American Premier Underwriters, Inc. Issuer credit rating BBB Subordinated debt rating BBB- American Annuity Group, Inc. Issuer credit rating BBB Senior debt rating BBB Subordinated debt rating BBB- American Annuity Group Capital Trust I Trust Originated Preferred Shares BBB- (gtd: American Annuity Group, Inc.) American Annuity Group Capital Trust II Capital Trust Securities BBB- (gtd: American Annuity Group, Inc.) American Annuity Group Capital Trust III ROPES BBB (gtd: American Annuity Group, Inc.) CONTACT: Matthew T Coyle, 212/208-8307 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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