Fitch affirms American Financial

Fitch Ratings said it affirmed the ratings of American Financial Group, Inc., including the A- issuer default rating and BBB+ senior convertible notes due 2033, following the announcement that American Financial plans to increase its ownership in Great American Financial Resources, Inc. to 100% from 81%.

The outlook remains stable.

Under the proposed merger transaction, Great American will acquire for cash all the outstanding shares not currently held by American Financial for a purchase price of $23.50 per share, for a total of $215 million. Great American will use cash on hand plus borrowings from American Financial to fund the transaction.

In Fitch's view, the transaction is unlikely to materially affect American Financial's consolidated capital position and could be mildly accretive to earnings in 2007. Great American's ratings have historically benefited from its majority ownership by American Financial and will continue to do so under the new ownership structure.

American Financial's ratings continue to be based on its solid market position as a specialty property/casualty insurance organization, adequate statutory capital levels and favorable trends in underwriting results and profitability, the agency said.

Partially offsetting these positives are American Financial's relatively high reinsurance leverage versus comparably rated peers and adverse loss reserve development experienced in each of the past five years, Fitch added.

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