Fitch Affirms Great American Financial Resources & Subsidiaries.

CHICAGO -- Fitch Ratings affirmed the 'BBB+' long-term issuer rating of Great American Financial Resources, Inc. (GAFRI). In addition, the 'A+' insurer financial strength ratings of GAFRI subsidiaries, Great American Life Insurance Co. (GALIC), Loyal American Life Insurance Co. and Annuity Investors Life Insurance Co. were also affirmed. Lastly, the trust originated preferred securities of American Annuity Group Capital Trust II was affirmed at 'BBB'. The Rating Outlook is Stable.

GAFRI is a publicly traded holding company that participates in the deferred fixed annuity and supplemental life insurance markets through its insurance company operating subsidiaries. GAFRI is 82% owned by American Financial Group (AFG), which has significant equity interests in a number of financial businesses including property/casualty insurance and life insurance and annuities. Ratings on GAFRI and its insurance subsidiaries have historically benefited from the financial flexibility provided by the larger AFG.

GAFRI has a successful niche in the qualified annuity market, particularly in the K-12 education market. Qualified business is typified by strong persistency, which is noteworthy given the potential of a rising interest rate environment. However profitability remains a concern as interest margins have been squeezed at GAFRI and fixed annuity writers in general. GAFRI's management expects spreads to narrow slightly in 2005 and then begin to widen.

The company has been selling new fixed annuity products with minimum crediting rates as low as 1.5% for over a full year, however, it will be some time before the new product offerings gain enough size to influence the overall profitability of the company in a meaningful way. Significantly, GAFRI's annualized GAAP pretax operating return on assets (ROA) improved during 2004 to 87 basis points, but continues to trail historic levels of 1.30%.

Management has committed to maintain NAIC risk-based capital (RBC) at GALIC above 300% of the company action level, and financial leverage below 30%. GAFRI's combined NAIC RBC was in excess of 360% and debt-to-total capital at GAFRI as of Dec. 31, 2004, was 26%. Fitch calculates this ratio giving 50% equity credit for GAFRI's preferred securities based on interest deferral features and maturity. The impact of unrealized gains from 'available for sale' bonds is also excluded from stockholders' equity when calculating leverage ratios.

Entity/Issue/Type             Action        Rating/Outlook

Great American Financial Resources, Inc.

--7.50% Senior notes         Affirmed       'BBB+'/Stable;

--6.875% Senior notes        Affirmed       'BBB+'/Stable.

American Annuity Group Capital Trust II

--Preferred Securities       Affirmed       'BBB'/Stable.

Great American Life Insurance Company

--Insurer financial strength Affirmed        'A+'/Stable.

Loyal American Life Insurance Company

--Insurer financial strength Affirmed        'A+'/Stable.

Annuity Investor Life Insurance Company

--Insurer financial strength Affirmed         'A+'/Stable.