U.S. Markets closed
  • S&P 500

    3,465.39
    +11.90 (+0.34%)
     
  • Dow 30

    28,335.57
    -28.09 (-0.10%)
     
  • Nasdaq

    11,548.28
    +42.28 (+0.37%)
     
  • Russell 2000

    1,640.50
    +10.25 (+0.63%)
     
  • Crude Oil

    39.78
    -0.86 (-2.12%)
     
  • Gold

    1,903.40
    -1.20 (-0.06%)
     
  • Silver

    24.70
    -0.01 (-0.04%)
     
  • EUR/USD

    1.1868
    +0.0042 (+0.3560%)
     
  • 10-Yr Bond

    0.8410
    -0.0070 (-0.83%)
     
  • Vix

    27.55
    -0.56 (-1.99%)
     
  • GBP/USD

    1.3038
    -0.0042 (-0.3207%)
     
  • USD/JPY

    104.7200
    -0.1200 (-0.1145%)
     
  • BTC-USD

    12,979.47
    +82.88 (+0.64%)
     
  • CMC Crypto 200

    260.05
    -1.40 (-0.54%)
     
  • FTSE 100

    5,860.28
    +74.63 (+1.29%)
     
  • Nikkei 225

    23,516.59
    +42.32 (+0.18%)
     

American Financial Offers 4.50% $200M Senior Unsecured Notes

Zacks Equity Research
·3 mins read

American Financial Group AFG announced the pricing of $200 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 4.50% and are scheduled to mature on Sep 16, 2060.

The company plans to deploy the net proceeds for  general corporate purposes that may include redemption of its $150 million aggregate principal amount of 6% subordinated debentures due 2055.

The company displayed prudence by issuing senior notes amid a low interest rate environment to procure funds and enhance financial flexibility without affecting liquidity. As of Jun 30, 2020 cash balance increased nearly three-fold to $496 million from 2019 end level.  

By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.

However, with the new issuance, interest expense will increase. But we still believe that the company is in a strong position to clear debts, banking on operational efficiencies.

As of Jun 30, 2020, total debt of the company was about $1.9 billion, up 30% from 2019 end. Debt-to-total adjusted capital ratio of 27.8 deteriorated 670 basis points. The latest offering will increase the debt-to-equity ratio by 200 basis points.

American Financial has traditionally maintained moderate adjusted financial leverage around 20%, with good cash flow and interest coverage ratio. On Jun 30, 2020, excess capital was approximately $850 million, which will enable the company to meet the debt obligations. The company expects to have significant excess capital and liquidity throughout 2020 and beyond. It scores strongly with credit rating agencies.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have lost 39.7% year to date compared with the industry’s decline of 7.5%.



Recently, W. R. Berkley Corporation WRB announced the pricing of $170 million aggregate principal amount of senior unsecured notes. The notes carry an interest rate of 4.00% and are scheduled to mature on Aug 15, 2050. MGIC Investment Corporation MTG issued $650 million in aggregate principal amount of 5.250% senior notes due 2028 while CNA Financial Corporation CNA issued 2.050% $500 million aggregate principal amount of senior unsecured notes due Aug 15, 2030 to capitalize on the low interest rate environment.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

 Click Here, See It Free >>
 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
 
CNA Financial Corporation (CNA) : Free Stock Analysis Report
 
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research