In an effort to expand its market presence as a leading
workers' compensation carrier in southeast U.S., property and
American Financial Group, Inc.
) announced its plans to buy Summit Holdings Southeast, Inc. and
its related companies from Liberty Mutual Group.
AMER FINL GROUP (AFG): Free Stock Analysis
ASPEN INS HLDGS (AHL): Free Stock Analysis
ALLIED WORLD AS (AWH): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
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The all-cash deal valued at $250 million is expected to see light
by second-quarter 2014. American Financial will fund the deal
from its cash pile and no external funding will be called for.
However, it will end up investing $400 million in Summit which
includes capital contribution at the closure of the deal.
Post the acquisition, Summit will continue to retain its name and
will continue to function under the Summit brand as a unit of
Great American Insurance Group.
Subsequent to the company's announcement of the acquisition,
rating agency Moody Investors Service of
) sprung into action. The rating agency affirmed the Baa1
senior debt rating for American Financial Group, and the A1
insurance financial strength (IFS) ratings of the company's
property and casualty operations led by Great American Insurance
The 'A2' IFS rating of American Financial's life insurance
subsidiary, Great American Life Insurance Company (GALIC), and
the 'A3' IFS rating of AFG's California workers' compensation
subsidiary, Republic Indemnity Insurance Company were also
reaffirmed. However, concerns relating to execution risk caused
Moody's to change the outlook to negative from stable on GAIC and
Summit's niche presence in the workers' compensation market and a
superior track record fits well with American Financial. We
believe that the acquisition will be accretive to the company's
growth over the medium-to-long term.
While American Financial carries a Zacks Rank #3 (Hold),
Allied World Assurance Company Holdings, AG
Aspen Insurance Holdings Ltd.
) with a Zacks Rank #1 (Strong Buy) are worth considering.