August 23, 2012 / 5:20 PM / in 5 years

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.

Holding Company Analysis, June 11, 2009


American Financial Group Inc.
Counterparty Credit Rating             BBB+/Stable

American Financial Group Inc.
$125 mil sr unsec notes                BBB+
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