TEXT-S&P rates American Financial Group notes 'BBB+'
Aug 23 - Standard & Poor's Ratings Services said today that it has assigned its 'BBB+' senior debt rating to American Financial Group Inc.'s (AFG) proposed $125 million senior unsecured notes. These notes will rank equally with AFG's existing and future unsecured senior notes. AFG intends to use the proceeds to redeem the outstanding balance on certain indebtedness. We expect minimal change to AFG's adjusted financial leverage ratios, which at year-end 2011 were 19.6%. This is because the company will use the proceeds from this new issuance and cash on hand to redeem its existing $115 million senior debentures due 2034 (7 1/8% interest rate). At the same time there could be a modest improvement in AFG's interest coverage to the extent that the interest rate on the new notes is less than on those redeemed. AFG's interest coverage was also strong, at 7.2x as of year-end 2011. AFG continued to report strong earnings, with a generally accepted accounting principles combined ratio of 92.5% as of June 30, 2012, compared with 97.2% for the same period in 2011. Shareholder equity increased to $4.6 billion as of June 30, 2012, from $4.4 billion at year-end 2011. The ratings reflect the group's strong competitive position enhanced by diversified specialty property/casualty insurance and selected life-insurance products, very strong operating performance with low volatility and very strong capital adequacy, and appropriate financial leverage that supports the rating. The investment portfolio's exposure to adverse economic conditions, high dependence on reinsurance recoverables, and elevated uncertainty related to the life segment's competitive position (given the strategic shift in its distribution model) partially offset these positive factors. RELATED CRITERIA AND RESEARCH Holding Company Analysis, June 11, 2009 RATINGS LIST American Financial Group Inc. Counterparty Credit Rating BBB+/Stable NEW RATING American Financial Group Inc. $125 mil sr unsec notes BBB+