AFG and P/C Subsidiaries Affirmed

Standard & Poor’s Ratings Services revised its outlook on American Financial Group Inc. and the members of the Great American Insurance Co. pool, the Republic Indemnity Co. pool, the American Empire Pool, the Great American Holdings Pool, and the MidContinent Pool to stable from negative.

S&P also affirmed its “A” counterparty credit and financial strength ratings on the operating companies. In addition, S&P affirmed its “BBB” counterparty credit rating on AFG.

According to an S&P credit analyst, “the group’s strong business position in its specialty property/casualty markets, continued strengthening of operating results, improved financial flexibility, and strong capital adequacy” influenced the outlook revision. Partially offsetting these factors is AFG’s marginal historical operating performance, exacerbated by a multitude of material charges and reserve development in recent years. In addition, AFG’s earnings diversification decreased following the IPO of its personal lines business in February 2003.

S&P believes AFG’s competitive position, as defined by its diversified portfolio of specialty lines business, is strong. Although AFG is not a market leader in any sub-segment, it does have a sufficient premium base ($3.2 billion in gross written specialty premium in 2003) to support a competitive infrastructure. With the disposal of the personal auto business in 2003, however, S&P believes management will be pressured to demonstrate that the strength and diversification of its specialty segments will fuel a consistently strong earnings stream over the long term.