Zacks Investment Research downgraded shares of American Financial Group Inc. (AFG) from OUTPERFORM to NEUTRAL on May 23, 2014, with a target price of $61.00.
We are downgrading our recommendation on American Financial to Neutral from Outperform. Though the company reported first quarter earnings a couple of pennies ahead of the Zacks Consensus Estimate, we expect low interest rates, exposure to catastrophes and a high concentration of risky securities in the company's investment portfolio will pose near term headwinds. Nevertheless, the company is a niche player in the property and casualty as well as annuity markets and will benefit from recent launch of Aviation Division and acquisition of Summit Holdings. Improving industry fundamentals such as price strengthening and increase in renewal ratio will drive overall growth. A strong balance sheet, low leverage and disciplined capital management are the other positives.
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