Rating Action on American Financial - Analyst Blog
27 2월 2013 - 8:40PM
Zacks
A.M. Best Co. reiterated the issuer credit rating (ICR) of
“bbb+” and all debt ratings of American Financial Group,
Inc. (AFG). Subsequently, the rating agency reiterated the
FSR of A (Excellent) and ICR of “a” of Great American Insurance
Companies. The outlook remains stable.
The rating affirmations of Great American account for its sturdy
risk-adjusted capitalization, continued solid operational results
reflecting strong underwriting performances and varied lines of
businesses.
However, these positives are dwarfed by considerable dividend
payments made to the parent company, higher common stock leverage
besides adverse loss development in certain lines of business.
Concurrently, A.M. Best reiterated the FSR of A+ (Superior) and
ICRs of “aa” of the property/casualty members of American Empire
Surplus Lines and FSR of A (Excellent) and ICRs of “a” of the units
of the Republic Indemnity Insurance Pool. The outlook remains
stable.
The ratings reflect excellent risk-adjusted capitalization,
sustained solid operating performance within the excess and surplus
lines marketplace (owing to underwriting profitability, low-cost
operating model and strong investment income) and management’s
successful efforts to sail through different phases of the market
cycle. The ratings also account for financial support provided by
American Financial Group.
Nevertheless, the positive factors were overshadowed by the
affectability of the group's premium volume to the
property/casualty market, the brunt of lower premiums and the
higher dividends paid over the last five years.
Additionally, the rating agency revised the FSR upward to A+
(Superior) from A (Excellent) and the ICRs to “aa-” from “a+” of
the property/casualty members of the Mid-Continent Group. However,
the outlook moves to stable from positive.
The ratings upgrade came on the back of its dominant footprint,
sustained solid operating results, sturdy risk-adjusted
capitalization and financial support provided by American Financial
Group. However, geographic limitations of the business and
considerable dividend payment are drags on the positives.
A.M. Best might consider rating upgrades if the company and its
subsidiaries continue to perform in line with its peers, besides
maintaining sturdy risk-adjusted capitalization. Also, rating
upgrades of subsidiaries might trigger upward revision of the
parent company’s ratings.
On the flip side, a dip in underwriting and operating results
subsequently affecting risk-adjusted capitalization or higher
leverage or lower interest coverage might lead to a ratings
downgrade.
American Financial Group carries a Zacks Rank #2 (Buy). Other
property & casualty insurers like EMC Insurance Group
Inc. (EMCI), Cincinnati Financial Corp.
(CINF) and Navigators Group Inc. (NAVG),
carry a Zacks Rank #1 (Strong Buy) and are worth noting.
AMER FINL GROUP (AFG): Free Stock Analysis Report
CINCINNATI FINL (CINF): Free Stock Analysis Report
EMC INSURANCE (EMCI): Free Stock Analysis Report
NAVIGATORS GRP (NAVG): Free Stock Analysis Report
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Zacks Investment Research
American Financial (NYSE:AFG)
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American Financial (NYSE:AFG)
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