AM Best Affirms Credit Ratings of American Financial Group, Inc. and Its Key Operating Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” (Superior) of Great American Insurance Company and its pooling affiliates, collectively referred to as Great American Insurance Companies (Great American). Concurrently, AM Best has affirmed the Long-Term ICR of “a-” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IRs) of American Financial Group, Inc. (AFG) [NYSE: AFG]. The outlook of these Credit Ratings (ratings) is stable.

At the same time, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of the property/casualty (P/C) members of the Great American Contemporary Pool (collectively, Great American Contemporary). The outlook of these ratings is stable. In addition, AM Best has assigned a FSR of A+ (Superior) and a Long-Term ICR of “aa-” (Superior) to Bridgefield Indemnity Insurance Company, a newly added member of Great American Contemporary. The outlook assigned to these ratings is stable. The Republic companies are headquartered in Calabasas, CA, and certain Bridgefield companies are domiciled in Lakeland, FL.

AM Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of the P/C members of the Mid-Continent Group (Mid-Continent) (headquartered in Tulsa, OK). Additionally, AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) of National Interstate Insurance Company (headquartered in Richfield, OH) and its affiliates (collectively referred to as National Interstate). The outlook of these ratings is stable.

All companies are subsidiaries of AFG and headquartered in Cincinnati, OH, unless otherwise specified. (Please see below for a detailed listing of the P/C companies and ratings.)

The ratings of Great American reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM). Great American’s ratings are aided by its risk-adjusted capital, which in recent years has been assessed in either the strongest or very strong category, as measured by Best’s Capital Adequacy Ratio (BCAR), with little volatility. Great American also has shown consistent operating performance on par with peers similarly assessed at the strong level, which is reflective of its profitable underwriting results that are supported by vast expertise within a diversified product portfolio and business profile through its multiple distribution platforms. An offsetting factor is a high dividend payout ratio to the parent company due to the capital management strategies of the parent company.

The ratings of Great American Contemporary reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM. The ratings of Great American Contemporary also reflect rating lift from the lead rating unit, Great American, based on historical support and services. The combined pool member entities maintain risk-adjusted capital at the very strong level, as measured by BCAR, which is supported by consistently strong operating performance that has remained profitable over the past five years and outperformed composite peers. Despite its narrow focus in the workers’ compensation segment, the group is among the market leaders in its focused geographic areas; in particular, the group’s members rank as the second-largest collective workers’ compensation provider in Florida through an extensive network of independent agents and advisers. Despite its leadership position, the group remains concentrated in Florida and California, which exposes the group to potential regulatory and legislative risks. The group members also maintain higher underwriting leverage than peers with a high dividend payout to its parent, tempering surplus growth.

The ratings of Mid-Continent reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect ratings lift from the lead rating unit, Great American, recognizing the historical support and services. Mid-Continent’s ratings are supported by its strongest risk-adjusted capital position, as measured by BCAR, and consistent ability to maintain this level of capital support with positive organic operating earnings. These factors are offset by its more concentrated earning segments and limited geographic profile, which exposes the group to increased regulatory, legislative and competitive risks.

The ratings of National Interstate reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM. The ratings also reflect lift from the lead rating unit, Great American, recognizing the historical support and services. National Interstate’s ratings are supported by risk-adjusted capitalization assessed at the strongest level, as measured by BCAR, a prudent investment portfolio and high quality of reinsurance partners. The group has shown significant expertise in its niche-focused market of captive risk transfer products for the transportation market. Despite this more limited focus, the group has demonstrated consistent favorable operating results on par with peers through continued strong underwriting results. Offsetting factors include a high dividend payout to its parent, and a concentrated market focus.

Each of the groups discussed above also benefits from the financial flexibility provided by AFG, which has additional liquidity sources given its access to capital markets and lines of credit. AM Best expects that earnings and cash flows from AFG’s operating subsidiaries will allow it to support risk-adjusted capitalization at the operating level, should the need arise. At the same time, surplus growth at each group has been limited over the past five years by the payment of significant stockholder dividends to AFG. These dividends vary based on capital requirements at the various subsidiaries. It is recognized that AFG’s financial leverage is maintained within AM Best’s methodology tolerance levels and continues to be supportive of the ratings. AFG also maintains coverage ratios that remain appropriate to the ratings.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed, each with a stable outlook, for Great American Insurance Company and its following pooled affiliates:

• Great American Alliance Insurance Company
• Great American Assurance Company
• Great American Casualty Insurance Company
• Great American E & S Insurance Company
• Great American Fidelity Insurance Company
• Great American Insurance Company of New York
• Great American Protection Insurance Company
• Great American Security Insurance Company
• Great American Spirit Insurance Company
• American Empire Insurance Company
• Great American Risk Solutions Surplus Lines Insurance Company

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed, each with a stable outlook, for the following P/C insurance members of Mid-Continent Group:

• Mid-Continent Assurance Company
• Mid-Continent Casualty Company
• Oklahoma Surety Company
• Mid-Continent Excess and Surplus Insurance Company

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed, each with a stable outlook, for the following P/C members of National Interstate Group:

• National Interstate Insurance Company
• National Interstate Insurance Company of Hawaii, Inc.
• Triumphe Casualty Company
• Vanliner Insurance Company

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) have been affirmed, each with a stable outlook for the following P/C members of Great American Contemporary Pool:

• Great American Contemporary Insurance Company
• Republic Indemnity Company of America
• Republic Indemnity Company of California
• Bridgefield Employers Insurance Company
• Bridgefield Casualty Insurance Company

The FSR of A+ (Superior) and the Long-Term ICR of “aa-” (Superior) has been assigned, each with a stable outlook, to Bridgefield Indemnity Insurance Company, a new member of Great American Contemporary Pool.

The Long-Term ICR of “a-” (Excellent) has been affirmed with a stable outlook for American Financial Group, Inc.

The following Long-Term IRs have been affirmed with stable outlooks:

American Financial Group, Inc. —

-- “bbb+” (Good) on $200 million 4.5% subordinated debentures, due 2060

-- “bbb+” (Good) on $150 million 5.625% subordinated debentures, due 2060

-- “bbb+” (Good) on $125 million 5.875% subordinated debentures, due 2059

-- “bbb+” (Good) on $200 million 5.125% subordinated debentures, due 2059

-- “a-” (Excellent) on $590 million 4.5% senior unsecured notes, due 2047 (of which $567 remains outstanding)

-- “a-” (Excellent) on $300 million 5.25% senior unsecured notes, due 2030 (of which $253 remains outstanding)

The following indicative Long-Term IRs have been affirmed with stable outlooks under the shelf registration:

American Financial Group, Inc.—

-- “a-” (Excellent) on senior unsecured debt

-- “bbb+” (Good) on subordinated debt

-- “bbb” (Good) on preferred stock

American Financial Capital Trust II, III & IV—

-- “bbb” (Good) on preferred securities

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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