AFG American Financial Group

A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and the issuer credit ratings (ICR) of ๏ฟฝa๏ฟฝ for the property/casualty operations of American Financial Group, Inc. (AFG) (Cincinnati, OH) (NYSE/NASDAQ: AFG). A.M. Best has also upgraded the FSR to A (Excellent) from A- (Excellent) and the ICR to ๏ฟฝa๏ฟฝ from ๏ฟฝa-๏ฟฝ of Republic Indemnity Pool (Encino, CA). Concurrently, A.M. Best has affirmed the debt ratings of ๏ฟฝbbb๏ฟฝ and ๏ฟฝbbb-๏ฟฝ of AFG๏ฟฝs various debt securities. The outlook for all ratings is stable. (See link below for a complete list of the ratings.) The ratings of AFG๏ฟฝs property/casualty casualty entities reflect their respectively strong capitalization, sustained operating earnings and solid business position. AFG is a leading provider of specialty insurance coverages to commercial buyers of insurance. Through its insurance operations, the group has demonstrated considerable depth and breadth of insurance company product offerings through an extensive distribution network. The group๏ฟฝs underwriting performance as of September 30, 2006 results generated a very strong GAAP combined ratio of 88.1 %. Somewhat offsetting these strengths are AFG๏ฟฝs adverse loss reserve development over recent years, which has impacted the operating performance of the Great American Insurance Companies, the largest rating unit within the AFG group in terms of premium volume. A.M. Best is also concerned with the potential impact that softening property/casualty markets could have on the group๏ฟฝs operating performance. However, A.M. Best believes that AFG๏ฟฝs specialty focus and balanced portfolio of insurance products on both an admitted and nonadmitted basis enable the group to effectively react to market conditions. Due to strong operating results through the third quarter of 2006 and the voluntary reduction of debt obligations, AFG๏ฟฝs financial flexibility is strong as evidenced by debt-to-total capital of 21% and strong interest coverage. Additionally, AFG has an untapped credit facility of $500 million and approximately $110 million of cash at the holding company. This is in contrast to early periods when AFG maintained financial leverage at the high-end of the acceptable range of its A.M. Best ratings. Nonetheless, AFG has relied on considerable stockholder dividends of its insurance subsidiaries to fund interest expense and provide capital to other members of the group. The upgrade of Republic Indemnity Pool (Pool) reflects its very strong stand-alone capitalization, solid operating performance and demonstrated expertise as a provider of workers๏ฟฝ compensation insurance coverages primarily in the state of California. Moreover, A.M. Best believes that financial and operational support provided by the parent company and the Pool๏ฟฝs standing as a significant business segment of AFG factor into the rating analysis. The Pool๏ฟฝs loss reserve development has stabilized since accident year 2001, which has contributed to significant underwriting gains. For a complete listing of American Financial Group๏ฟฝs FSRs, ICRs and debt ratings, please visit www.ambest.com/press/112802americanfinancialgroup.pdf. A.M. Best Co., established in 1899, is the world๏ฟฝs oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best๏ฟฝs Web site at www.ambest.com. A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" for the property/casualty operations of American Financial Group, Inc. (AFG) (Cincinnati, OH) (NYSE/NASDAQ: AFG). A.M. Best has also upgraded the FSR to A (Excellent) from A- (Excellent) and the ICR to "a" from "a-" of Republic Indemnity Pool (Encino, CA). Concurrently, A.M. Best has affirmed the debt ratings of "bbb" and "bbb-" of AFG's various debt securities. The outlook for all ratings is stable. (See link below for a complete list of the ratings.) The ratings of AFG's property/casualty casualty entities reflect their respectively strong capitalization, sustained operating earnings and solid business position. AFG is a leading provider of specialty insurance coverages to commercial buyers of insurance. Through its insurance operations, the group has demonstrated considerable depth and breadth of insurance company product offerings through an extensive distribution network. The group's underwriting performance as of September 30, 2006 results generated a very strong GAAP combined ratio of 88.1 %. Somewhat offsetting these strengths are AFG's adverse loss reserve development over recent years, which has impacted the operating performance of the Great American Insurance Companies, the largest rating unit within the AFG group in terms of premium volume. A.M. Best is also concerned with the potential impact that softening property/casualty markets could have on the group's operating performance. However, A.M. Best believes that AFG's specialty focus and balanced portfolio of insurance products on both an admitted and nonadmitted basis enable the group to effectively react to market conditions. Due to strong operating results through the third quarter of 2006 and the voluntary reduction of debt obligations, AFG's financial flexibility is strong as evidenced by debt-to-total capital of 21% and strong interest coverage. Additionally, AFG has an untapped credit facility of $500 million and approximately $110 million of cash at the holding company. This is in contrast to early periods when AFG maintained financial leverage at the high-end of the acceptable range of its A.M. Best ratings. Nonetheless, AFG has relied on considerable stockholder dividends of its insurance subsidiaries to fund interest expense and provide capital to other members of the group. The upgrade of Republic Indemnity Pool (Pool) reflects its very strong stand-alone capitalization, solid operating performance and demonstrated expertise as a provider of workers' compensation insurance coverages primarily in the state of California. Moreover, A.M. Best believes that financial and operational support provided by the parent company and the Pool's standing as a significant business segment of AFG factor into the rating analysis. The Pool's loss reserve development has stabilized since accident year 2001, which has contributed to significant underwriting gains. For a complete listing of American Financial Group's FSRs, ICRs and debt ratings, please visit www.ambest.com/press/112802americanfinancialgroup.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.