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Moody's ups American Financial view to positive
Moody's Investors Service said it affirmed the Baa3 senior debt ratings of American Financial Group, Inc. and its subsidiary Great American Financial Resources, Inc. and changed the outlook to positive from stable.
The agency said the positive outlook reflects the American Financial Group's improving trends in capital adequacy and financial leverage coupled with stronger operating earnings and improved dividend capacity coverage of interest and dividends. The positive outlook for Great American reflects the implicit support provided by American Financial Group as well as Great American's improving standalone financial fundamentals, including improved statutory capitalization and profitability.
The affirmation of American Financial Group reflects its niche position in many specialty commercial lines, its focus on underwriting profitability and the diversification offered by its life and annuity operations, the agency said. These strengths are tempered by the company's relatively high operational and financial leverage, the potential for adverse development on core reserves, exposure to gross catastrophe losses and concerns surrounding the company's corporate governance structure.
Moody's said the affirmation of Great American reflects its niche position in the tax-deferred annuity business, which has significant barriers to entry on the qualified market side, and the company's stable earnings base, improving expense structure and implicit support from American Financial. Credit weaknesses include the potential for adverse regulation in the company's core 403(b) market, relatively high financial leverage, and modest earnings coverage.
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