A.M. Best Affirms Credit Ratings of American Financial Group, Inc. and Most of Its Insurance SubsidiariesSource: Business Wire
At the same time,
All companies are subsidiaries of AFG and are headquartered in
The ratings of Great American reflect the group’s solid risk-adjusted capitalization, consistently strong operating profitability, which has been sustained over the long term, and diversified business profile, which serves to protect its earnings stream. Great American’s strong operating performance reflects the profitable underwriting results derived through management’s disciplined operating strategy and specialty market knowledge, as well as the group’s multiple distribution channels, diversified product offerings, excellent geographic spread of risk and access to data through its sophisticated technology platform.
These positive ratings factors are somewhat offset by elevated common stock leverage and adverse prior- year loss reserve development occurring in certain lines of business. While Great American has reported overall favorable loss reserve development in recent calendar years, adverse reserve development in certain areas persists, particularly relating to the run-off of its asbestos and environmental claims.
The downgrade of the Long-Term ICR of American Empire reflects A.M.
Best’s view that although the group historically reported very favorable
underwriting and operating results, recent results have sharply
deteriorated and no longer support a Long-Term ICR of “aa”. The decline
in performance has been driven by adverse development of prior years’
loss reserves reported in recent years that have caused underwriting
results to deteriorate from their highly profitable historical level. In
2016, adverse prior-year loss reserve development caused the calendar
year combined ratio to deteriorate by approximately 41 points. The
unfavorable development has been driven by the other liability line of
business, specifically relating to the
Management has taken a number of steps to restore the group's profitability to historically strong levels. These steps include but are not limited to rate increases, more restrictive underwriting guidelines and a refined approach to claims mediation. While results in the first half of 2017 appear to be stabilizing, it is too early to gauge the ultimate effectiveness of these initiatives.
American Empire’s ratings reflect the group’s supportive risk-adjusted capitalization, very strong operating performance over the long term within the excess and surplus lines market (despite the more recent deterioration in performance) and the executive team’s longer term successful track record in managing operations through all phases of the market cycle. The ratings also recognize the implicit and explicit support afforded by AFG, which has infused capital as needed to maintain risk-adjusted capitalization at a level in line with the ratings.
The positive Long-Term ICR outlook for the members of the
The ratings of the
These positive rating factors are somewhat offset by the concentrated
nature of the group’s business in a single line of insurance and
geographic concentration in two states,
Mid-Continent’s ratings reflect its solid risk-adjusted capitalization, very strong operating performance sustained over the long term and successful position within its targeted markets. The group’s favorable underwriting and operating results reflect management’s proven product knowledge and commitment to maintaining accurate pricing.
These positive rating factors are partially offset by adverse prior-year
loss reserve development in recent years arising from the product
liability line of business, which has pressured underwriting results for
the past several years. Additional offsetting factors include the
group’s relatively limited geographic spread of business as the majority
of business is derived from
National Interstate’s ratings reflect the group’s strong long-term operating performance; solid risk-adjusted capitalization achieved through generally profitable underwriting results; and demonstrated expertise within its niche transportation market. In addition, the ratings acknowledge the group’s experienced management team and conservative operating philosophy. The positive rating attributes are derived from management’s focus on maintaining rate integrity, controlled claims handling and detailed segmentation of risks that are supported by effective technology resources. Additionally, National Interstate’s focus on providing alternative risk transfer programs for the specialty transportation segment provides the group with a sustainable competitive advantage, particularly in terms of pricing, claims adjusting and loss control.
Partially offsetting these positive rating factors are adverse development of some recent calendar year loss reserves (although the 2014 and 2015 accident years have both developed favorably) and the associated deterioration in underwriting results in recent calendar years; as well as the concentration of business within the passenger and truck transportation industries.
The ratings of GALIC and AILIC reflect their leading market position in
the sale of fixed-indexed annuity products through the bank distribution
channel, and their consistent net operating earnings and strong
risk-adjusted capitalization. Additionally, strong growth in the annuity
business over the past several years has helped GALIC and AILIC become
material contributors to AFG’s consolidated revenue and earnings. As a
Offsetting rating factors include the group’s continued concentrated business profile within the individual annuity market, premium declines within the retail and educational channels, and the group’s exposure to real estate-related investments, in particular, residential mortgage-backed securities, relative to its peers, and additional high exposure to collateralized loan obligations as a percentage of total capital.
Manhattan National’s ratings reflect its strong risk-adjusted
capitalization offset by its declining premium and statutory earnings
Each of the groups also benefit from the financial flexibility provided
by AFG, which maintains financial leverage that is in line with its
current ratings, as well as additional liquidity sources given its
access to capital markets and line of credit.
AFG’s debt-to-capital (excluding accumulated other comprehensive income) and interest coverage ratios remain within A.M. Best’s guidelines for its current ratings. AFG maintains sound liquidity and access to a revolving credit facility. AFG has no material debt maturing until 2019, further benefiting its liquidity position. AFG relies on stockholder dividends from its subsidiaries to fund interest expenses, repurchase company stock, redeem debt, reallocate capital to support its operating entities and for other corporate purposes. Nonetheless, management remains committed to maintaining capital at the rated entities at levels commensurate with their ratings.
For a complete list of
This press release relates to Credit Ratings that have been published
on A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
Gregory Dickerson, +1 908-439-2200, ext. 5161
Senior Financial Analyst—P/C
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Igor Bass, +1 908-439-2200, ext. 5109
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations