Fitch Assigns 'BBB+' to Great American Financial Resources Debt Issuance.Business Editors CHICAGO--(BUSINESS WIRE)--Oct. 21, 2003 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 assigned the existing senior debt rating of 'BBB+' to the new $100 million debt issuance from Great American Financial Resources, Inc. (GAFR). The Rating Outlook is Stable. The senior debt issuance has a 30-year maturity with a 5-year 'no call' provision. Proceeds from the new issuance will be used to pay down bank debt, and will consequently not impact GAFR's leverage ratios. This debt issuance is effectively lengthening the maturity on some bank debt that was due within the year. Debt-to-total capital at GAFR as of June 30, 2003 was 27.7%, which was consistent with management's commitment to maintain financial leverage below 30%. Fitch calculates this ratio giving 50% equity credit for GAFR's preferred securities and excluding the impact of unrealized gains from 'available for sale' bonds from stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. . GAFR's strength lies in its established niche in the qualified annuity market, which is typified by profitable and persistent business. GAFR offers fixed and variable annuities to both qualified and non-qualified markets, life and accident and health insurance through its insurance operating subsidiaries Great American Life Insurance Co. (GALIC GALIC Great American Life Insurance Company ), Loyal American Life Insurance Co., Annuity Investors Life Insurance Co. and United Teachers Associates Insurance Co. Management at GAFR has made moves to address balance sheet strength. Specifically, proceeds from a $60 million rights offering during the third quarter of this year were used to bolster surplus at operating subsidiaries and pay down bank debt. Management has committed to maintain NAIC NAIC See National Association of Investors Corporation (NAIC). RBC RBC red blood cell. RBC or rbc abbr. red blood cell RBC, n See red blood cell count. RBC red blood cells; red blood (cell) count (see blood count). at GALIC above 300% of the company action level. The company undertook expense initiatives which are expected to help profitability at a time when many fixed annuity writers are struggling to show good results. Total revenue at GAFR for the first six months of 2003 was $445 million, up more than 6% from the comparable period in 2002. GAFR has total assets of $10 billion and stockholders' equity of $958 million as of June 30, 2003. GAFR's annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. pretax operating Return on Assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). (ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). ) was 0.65%, which remains considerably below its historic average. Fitch expects GAFR's ROA to be back to historic levels within the next one or two rating cycles. Annualized GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). return on average stockholders' equity (ROE) for the first half of 2003, excluding the impact of unrealized investment gains from the bond portfolio on stockholders' equity, was 4.5%. Operating ROE, which excluded nearly $12 million in realized investment losses, was 6.8%. Both these ROE measures are below historic levels. Entity/Issue/Type Action Rating/Outlook Great American Financial Resources, Inc. -- 7.50% Senior notes Assigned 'BBB+'/Stable; -- 6.875% Senior notes No Action 'BBB+'/Stable. Annuity Group Capital Trust I & II -- Trust preferred securities No Action 'BBB'/Stable. Great American Life Insurance Company -- Insurer financial strength No Action 'A+'/Stable. Loyal American Life Insurance Company -- Insurer financial strength No Action 'A+'/Stable. Annuity Investor Life Insurance Company -- Insurer financial strength No Action 'A+'/Stable. |
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