Fitch Affirms American Financial Group Inc. Following Merger Announcement.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings of 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 ) and its life operations Great American Financial Resources, Inc. (GAFRI GAFRI Great American Financial Resources, Inc. ), following yesterday's announcement that AFG plans to increase its ownership in GAFRI from 81% to 100%. (The ratings for AFG, GAFRI, and related subsidiaries are listed below.) Under the proposed merger transaction, GAFRI will acquire for cash all the outstanding shares not currently held by AFG for a purchase price of $23.50 per share, for an aggregate amount of approximately $215 million. GAFRI will use cash on hand plus borrowings from AFG to fund the transaction. In Fitch's view, the transaction is unlikely to materially affect AFG's consolidated capital position and could be mildly accretive to earnings in 2007. GAFRI's ratings have historically benefited from its majority ownership by AFG and will continue to do so under the new ownership structure. AFG's ratings continue to be based on its solid market position as a specialty property/casualty insurance organization, adequate statutory capital levels, and favorable trends in underwriting results and profitability. Partially offsetting these positives are AFG's relatively high 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. leverage versus comparably rated peers and adverse loss reserve development experienced in each of the past five years. GAFRI participates in the deferred annuity Deferred Annuity A type of annuity contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which and supplemental insurance markets through its insurance company operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. . GAFRI has a successful niche in the qualified annuity market, particularly in the K-12 education market. The recent Ceres acquisition provides opportunities for product diversification, new distribution relationships, and operating efficiencies, as well as strengthens the company's market position in the Medicare supplement business. The annuity and supplemental insurance operations housed in GAFRI historically have not been seen as core to the AFG enterprise, since that business is smaller than the property/casualty operation and is sold through a distinct distribution force. However, the annuity and supplemental insurance operations do receive some rating credit for its ownership by AFG. Specifically, GAFRI is profitable and consistently contributes between one-quarter and one-third of consolidated 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 . Also, AFG management considers investment management a fundamental expertise and assets from GAFRI amount to more than one-half of consolidated assets that are managed by an AFG subsidiary. Fitch's affirms the following ratings for AFG, GAFRI, and related subsidiaries as follows, all with a Stable Outlook: American Financial Group, Inc. --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'A-'; --7.125% senior due 2009 at 'BBB+'; --7.125% senior due 2007 at 'BBB+'; --Senior convertible notes due 2033 at 'BBB+'; --Senior Debentures due 2034 at 'BBB+'. American Premier Underwriters, Inc. --IDR at 'A-'; --10.875% subordinate notes due 2011 at 'BBB'. Great American Insurance Company Intercompany Pool: Great American Insurance Company Great American Insurance Company of New York Great American Fidelity Insurance An agreement whereby, for a designated sum of money, one party agrees to guarantee the loyalty and honesty of an agent, officer, or employee of an employer by promising to compensate the employer for losses incurred as a result of the disloyalty or dishonesty of such individuals. Company Great American Spirit Insurance Company Great American Security Insurance Company Great American Protection Insurance Company Great American Alliance Insurance Company Great American Assurance Company Great American E&S Insurance Company Great American Contemporary Insurance Company Worldwide Casualty Insurance Company --Insurer financial strength at 'A+'. Republic Indemnity Company of America --Insurer financial strength at 'A+'. American Empire For other uses, see American Empire (disambiguation). American Empire is a term relating to the historical expansionism and the current political, economic, and cultural influence of the United States on a global scale. Surplus Lines Insurance Company --Insurer financial strength at 'A+'. Mid-Continent Casualty Company --Insurer financial strength at 'A+'/Stable. Great American Financial Resources, Inc. --IDR at 'A-'; --7.50% senior notes due 2033 at 'BBB+'; --6.875% senior notes due 2008 at 'BBB+'. --7.25% senior notes due 2034 at 'BBB+'. American Annuity Group Capital Trust II --Preferred securities at 'BBB'. Great American Life Insurance Company --Insurer financial strength at 'A+'. Loyal American Life Insurance Company --Insurer financial strength at 'A+'. Annuity Investors Life Insurance Company --Insurer financial strength at 'A+'. United Teacher Associates Insurance Company --Insurer financial strength at 'A+'. Central Reserve Life Insurance Company --Insurer financial strength at 'A'. Continental General Insurance Company --Insurer financial strength at 'A'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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