American Financial to Buy Summit - Analyst Blog
11 1월 2014 - 4:50AM
Zacks
In an effort to expand its market presence as a leading workers'
compensation carrier in southeast U.S., property and casualty
insurer, American Financial Group, Inc. (AFG)
announced its plans to buy Summit Holdings Southeast, Inc. and its
related companies from Liberty Mutual Group.
The all-cash deal valued at $250 million is expected to see light
by second-quarter 2014. American Financial will fund the deal from
its cash pile and no external funding will be called for. However,
it will end up investing $400 million in Summit which includes
capital contribution at the closure of the deal.
Post the acquisition, Summit will continue to retain its name and
will continue to function under the Summit brand as a unit of Great
American Insurance Group.
Subsequent to the company’s announcement of the acquisition, rating
agency Moody Investors Service of Moody’s Corp.
(MCO) sprung into action. The rating agency affirmed the Baa1
senior debt rating for American Financial Group, and the A1
insurance financial strength (IFS) ratings of the company’s
property and casualty operations led by Great American Insurance
Company (GAIC).
The 'A2' IFS rating of American Financial’s life insurance
subsidiary, Great American Life Insurance Company (GALIC), and the
'A3' IFS rating of AFG's California workers' compensation
subsidiary, Republic Indemnity Insurance Company were also
reaffirmed. However, concerns relating to execution risk caused
Moody’s to change the outlook to negative from stable on GAIC and
GALIC.
Summit’s niche presence in the workers' compensation market and a
superior track record fits well with American Financial. We believe
that the acquisition will be accretive to the company’s growth over
the medium-to-long term.
While American Financial carries a Zacks Rank #3 (Hold),
better-ranked stocks Allied World Assurance Company
Holdings, AG (AWH) and Aspen Insurance Holdings
Ltd. (AHL) with a Zacks Rank #1 (Strong Buy) are worth
considering.
AMER FINL GROUP (AFG): Free Stock Analysis Report
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
ALLIED WORLD AS (AWH): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
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Zacks Investment Research
American Financial (NYSE:AFG)
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