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CHICAGO--([ BUSINESS WIRE ])--Fitch Ratings has assigned a 'BBB+' rating to American Financial Group, Inc.'s (NYSE: AFG) $200 million issuance of 6.375% senior unsecured debt maturing in June 2042.

Proceeds from the issuance are expected to be used to redeem outstanding debt of Great American Financial Resources, Inc., a subsidiary of AFG. This debt is currently guaranteed by AFG. Consequently, the issuance is not expected to change AFG's run rate financial leverage of 19.5% as of March 31, 2012. Both the new issuance and the debt to be redeemed will be outstanding for a several week period and debt-to-total capital will reach a peak of approximately 23%.

Earnings before interest and taxes covered interest expense by 5.9 times (x) through the first three months of 2012, down modestly from 6.7x for 2011. This level of interest coverage remains within ratings expectations. Debt-servicing capabilities remain ample due to solid operating company maximum dividend capacity and holding company cash and investments.

Key ratings triggers that could lead to a downgrade over the longer term include: material deterioration in property and casualty (P/C) reserve adequacy or prolonged deterioration in P/C underwriting performance; financial leverage in excess of 30%; and for annuity and supplemental insurance (A&SI), a material and sustained deterioration in operating performance or a material increase in surrenders, either of which required resources from the holding company or P/C operations to support.

Separately, the ratings of AFG's A&SI operating companies could be moved toward their stand-alone ratings if Fitch changed its view on the segment's strategic importance to AFG. This could occur if the rapid growth in the segment continues and the segment's financial performance and risk profile further diverged from the P/C segment.

Key ratings triggers that could lead to an upgrade over the longer term include: improvement in P/C reserve adequacy, underwriting and investment performance commensurate with higher rated companies, and/or a decrease in the target maximum for long-term financial leverage below 15%.

Fitch assigned the following rating:

American Financial Group, Inc.

--6.375% senior notes due 2042 at 'BBB+'.

Fitch took no action on the following ratings for AFG:

American Financial Group, Inc.

--Issuer Default Rating (IDR) at 'A-';

--9.875% senior notes due 2019 at 'BBB+';

--7.125% senior debentures due 2034 at 'BBB+';

--7% senior debentures due 2050 at 'BBB+'.

Great American Financial Resources, Inc.

--IDR at 'A-';

--7.5% senior notes due 2033 at 'BBB+';

--7.25% senior notes due 2034 at 'BBB+'.

American Annuity Group Capital Trust IV

--7.35% preferred securities at 'BBB-'.

Additional information is available at '[ www.fitchratings.com ]'. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018 ]

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