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Best’s News & Research Service - January 28, 2021 05:15 PM (EST)

AM Best Places Credit Ratings of American Financial Group’s L/A Subs Under Review After Announced Sale; Comments on P/C Subs

  • January 28, 2021 05:15 PM (EST)
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Oldwick //BestWire// - AM Best has placed under review with developing implications the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Great American Life Insurance Company (GALIC) and its wholly owned subsidiary, Annuity Investors Life Insurance Company (AILIC), which are the key annuity subsidiaries of American Financial Group, Inc. (AFG) (collectively referred to as Great America Life Group). Concurrently, AM Best has placed under review with developing implications the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of Manhattan National Life Insurance Company (Manhattan National), a life subsidiary of GALIC. All companies are domiciled in Cincinnati, OH.

AM Best is placing the annuity and life companies under review with developing implications due to the sale of the Great American Life Group and Manhattan National Life Insurance Company to Massachusetts Mutual Life Insurance Company (MassMutual). Both rating units currently receive rating enhancement from their lead rating unit and this will be reviewed within the new ownership structure to determine whether any changes are warranted based upon the business strategy, integration plan and any implicit or explicit support provided by MassMutual.

In addition, AM Best has commented that all Credit Ratings (ratings) of AFG and its property/casualty (P/C) operating subsidiaries remain unchanged by the announced sale, which represents AFG’s exit from the annuity and life marketplace. AM Best does not expect any disruption to AFG’s P/C business and does not expect any ratings impact to the balance sheet, operating performance, business profile, or enterprise risk management due to this sale.

AFG is not expected to participate in the annuity and life marketplace through its other entities or use the proceeds from the sale to compete within these market segments again in the near term. The sale represents a significant divestment as the annuity and life operations made up roughly 60% of AFG’s assets and 30% of its pre-tax operating earnings; however, the sale price of $3.5 billion represents a material increase in available capital at the holding company. AM Best views the increase in capital at the holding company due to the transaction positively. In the near term, AM Best expects financial leverage and interest coverage ratios to remain within AM Best’s methodology guidelines; however, any future material increase in financial leverage would be viewed negatively.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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