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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) (Cincinnati, OH) [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 and formerly known as Republic and Summit Insurance Pool). The outlook of these ratings is stable. Republic is headquartered in Calabasas, CA, and Summit is 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 the aforementioned ratings is stable.

All companies are subsidiaries of AFG and headquartered in Cincinnati, OH, unless otherwise specified. (Please see link 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 strongest, 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 consistently assessed in the strongest category, as measured by Best’s Capital Adequacy Ratio (BCAR), with little volatility. Great American also has 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 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. 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, ranking as the largest provider in Florida through an extensive network of independent agents and advisers. Despite its leadership position, it remains concentrated in Florida and California, which exposes the group to 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 provided by ultimate parent, AFG. 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 through 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. 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 with a similar balance sheet strength assessment level of strong through strong underwriting results. Offsetting factors include a high dividend payout to its parent, and a more 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 favorable to the ratings.

A complete listing of American Financial Group, Inc.’s subsidiaries’ FSRs, Long-Term ICRs and Long-Term IRs also is available.

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.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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